THE GOVERNMENT has not ruled out public investment in the banks, Minister for Finance Brian Lenihan has said.
He also said liquid assets in the National Pension Reserve Fund could be used if appropriate.
At least two investors backed by Middle Eastern sovereign-wealth funds are seeking to become shareholders in Bank of Ireland or a merged group made up of Bank of Ireland and Irish Life and Permanent.
Speaking on RTÉ radio yesterday, Mr Lenihan said the Government's "crucial, central, core concern" was that the banks would be in a position to lend money into the economy.
He said he received a report last week, commissioned by the Government, analysing the loan quality of the banks.
"It does confirm that there is no threat to the solvency of the banks and that they can meet the regular capital requirements," he said.
"However, there is a world of difference between a solvent bank and a bank that is thriving and putting money into the economy."
The concern was not that the banks could survive but that they could "exist as a motor in the economy". He said State investment would be a last resort.
"If private money is prepared to invest in the banks on appropriate terms and on terms that serve the public interest, then the Government would welcome that," he said. "The Government hasn't ruled out public investment, but what we have said is the banks will have to seek private investment in the first instance."
Mr Lenihan said it was legitimate that the taxpayer should not be asked to inject all of the funds required to recapitalise the banks. That would, in effect, be nationalising them, he said.
"It would be difficult to justify having six separate institutions when the taxpayer had wholly invested in all of them," he said.
Asked if the Pension Reserve Fund could be used, Mr Lenihan said it had lost a lot of money in the last year. If the shares in the fund were sold that could involve a substantial loss to the pensioners of the future, he said.
"But there are more liquid assets in the pension fund that could be used in the appropriate circumstances," he added.
Mr Lenihan also said he was not insulted by being voted the second worst finance minister in Europe by the Financial Timesnewspaper.
He said the reason behind the accolade was that he had not consulted with other European ministers before introducing the bank guarantee. He said he had put the country first and if he received criticism for that, he didn't mind.
Meanwhile, sources close to former taoiseach Bertie Ahern confirmed that Mr Lenihan was one of a number of players in the banking crisis who contacted him for advice. Mr Ahern also spoke to investment manager Nick Corcoran, one of the figures behind the Mallabraca consortium - the Middle East fund considering an investment in Bank of Ireland.
A bank and a building society also contacted him. Sources close to Mr Ahern say all that happened was that he was asked for advice and gave it.
