National pension fund could be used to recapitalise banks, says Lenihan

Minister for Finance Brian Lenihan has said the Government has not ruled out public investment in the banks.

He also said "liquid assets" in the Pension Reserve Fund could be used if appropriate.

Speaking on RTE radio today, Mr Lenihan said the Government's "crucial, central, core concern" was that the banks would be in a position to lend money to businesses working in the economy.

He said he had received a confidential 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 in the banks 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.

He also said the Government would be concerned by "asset strippers", but pointed out that under the terms of the bank guarantee scheme introduced last month, dividend policy and business plans of banks would be supervised by the Government over the next two years.

"That's a valuable safeguard," 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 entirely legitimate that the tax payer should not be asked to put in all of the funds needed to capitalise 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 in Ireland. He said he had put the country first and if he received international criticism for that, he didn't mind.