THE STATE may be able to draw on its first €280 million dividend from the two main banks within “a matter of weeks”, a Dáil committee heard yesterday.

John Corrigan, chief executive of the National Treasury Management Agency (NTMA), told the Public Accounts Committee that the agency’s preference would be to receive the funds in cash rather than as shares in the banks.

A share alternative would become due if cash payments could not be made.

The first such dividend payment, from Bank of Ireland, is due on February 20th, but is unlikely to be transferred by that date because of restrictions on dividends imposed by the European Commission.

The commission has said the two main banks should not make the payments while it is assessing their plans for restructuring. AIB is due to make its first €280 million payment in May.

Mr Corrigan acknowledged before the committee that the State would be entitled to take shares in Bank of Ireland if the bank “ defaulted” on the February 20th payment.

However, he added, it is better to be “patient about these things”. “Our view is that we would prefer to get the money in cash,” said Mr Corrigan.

The State already holds an effective stake of 25 per cent in both Bank of Ireland and AIB, having invested €7 billion via preference shares in an effort to prop up the domestic banking sector.

The commission has indicated, according to Mr Corrigan, that it does not intend to permanently defer dividend payments from the banks.

He said there was “a lot of to-ing and fro-ing” on the matter, which was being handled by the Department of Finance.

A resolution may come within weeks, he added.

Bank of Ireland declined to comment on the matter last night, pointing instead to an earlier statement about “ongoing discussions” with the commission and the Department of Finance.

Mr Corrigan later told reporters that the banks would shortly begin to transfer bad loans to the National Asset Management Agency (Nama), thus allowing for an assessment of the level of additional capital they may need.

The governor of the Central Bank, Patrick Honohan, said earlier this week that it was “pretty clear” the Government would need to acquire additional equity stakes in the banks in the future.

While the government wants the banks to raise the capital from investors, it has pledged to step in if required. – (Additional reporting Bloomberg)