The chairman of AIB yesterday discounted the prospect of a merger with another bank for "at least 10 years" and claimed that the establishment of a pan-European bank was impossible until member-states relinquished their desire for "national champions" in the industry.

In his speech to the Irish division of the Association of European Journalists in Dublin, Mr Lochlann Quinn revealed that he had never dealt with a serious takeover bid in his seven-year term as chairman. Referring to recent reports of National Australia Bank's interest in the Republic, Mr Quinn claimed that "neither AIB nor Bank of Ireland would be taken over by an outsider buyer.

"My feeling is that neither bank will be taken over. Now I may be wrong about that but there's no evidence that an outsider is interested," he said.

Mr Quinn argued the Republic's banking industry was too mature and the population too small to justify an outside takeover looking for a pan-European reach. He said: "The main banks here are well run so you wouldn't pay a premium because you can't improve them by any significant amount. And they're going nowhere because it's a relatively mature market."

Mr Quinn said the notion of a pan-European bank had increasingly become a source of debate in the industry since the launch of the single currency, but he claimed that launching it from Ireland was about as "logical as launching it in Estonia".

He said: "If you wanted to build the famous pan-European bank, you'd start in the countries that have the five largest population centres such as the UK, France, Germany, Italy and Spain."

Arguing that competition in the banking industry still moved along fiercely nationalistic lines, Mr Quinn said that no government in the euro zone would forego its influence over a national player in the interests of greater competition. Instead consolidation within the industry would continue to develop "in-country" leading to "two or three, or indeed one" main player for each state.

Journalists later quizzed Mr Quinn over the rising level of home loans in the Republic, which some analysts believe is driving up house prices. But Mr Quinn rejected any threat to the industry from such fast-paced asset growth and replied "if people can afford to repay a house loan then we will give them one".