MINISTER FOR Finance Brian Lenihan has said a private move on the banks need not necessarily be a threat.
"We cannot characterise foreign investment all the time as predatory or a threat. Of course, if there is private investment in the banks, I will have to ensure that the public interest is served," he said.
He said he has never ruled out State investment, but repeated that it was "a last resort". He said the banks had "to demonstrate their capacity to attract private money" and that much of Ireland's economic success depended on foreign investment.
Mr Lenihan told a financial services industry dinner last night that it was "clear that regulators in Ireland as elsewhere need to learn the lessons of recent events".
Trade unions representing staff at the banks have called on the Government to reject any proposed large investment by private equity firms and foreign state-controlled wealth funds in the banks.
The finance union, the Irish Bank Officials' Association (IBOA), said that if Bank of Ireland (BoI) was to embrace investment by private equity firms to any significant degree, it would represent a disaster for customers, staff, shareholders and for the State.
The Unite trade union criticised such investments as "undesirable, unwanted and unacceptable".
The IBOA said a merger of BoI and Irish Life Permanent (ILP), which one private equity consortium has proposed, would lead to 3,500 job losses "at the very least".
BoI is holding talks this week with the Irish-led Mallabraca group, which comprises US private equity firms JC Flowers, the Carlyle Group and two Middle Eastern sovereign wealth funds, about a possible investment.
IBOA general secretary Larry Broderick said the Government should intervene to advise the bank that such investments would offer a short-term easing of its current problems "but at too high a cost".
"Private equity funds are the real sharks of the business world. They operate on the basis of maximising short-term opportunities," he said.
The Mallabraca consortium has raised €5 billion to buy a stake in BoI, which would dilute shareholders' investment, and inject further capital to cover rising loan losses.
It has access to more funds to buy into a possible merged bank comprising BoI and ILP. The consortium is planning to hold any investment for at least five years.
It has emerged that Nick Corcoran, who helped to assemble the group, asked former taoiseach Bertie Ahern for advice about investing in the sector. Mr Corcoran, a director of investment firm Cardinal Asset Management and Mallabraca, is from Mr Ahern's Dublin constituency.
BoI's largest shareholder, Harris Associates, an activist US fund, gave the bank's management a vote of confidence yesterday and said the bank did not need to raise capital after it increased its stake in the company.