TAOISEACH BRIAN Cowen has said the Government is considering all options to secure the Irish banks and has played down suggestions that there were imminent plans to make State investments into the sector.
Mr Cowen made his comments as the six guaranteed institutions prepared to submit revised business plans to the Financial Regulator today, showing how they intend to reduce the risks facing them under the State guarantee scheme.
Contacts between the Government and international private investment firms, which have expressed an interest in buying stakes in one or a number of banks, have intensified.
Approaches have been made to the Government by several parties, among them New York-based investment bank Sandler O'Neill, concerning a private investment in the banks. US private equity firm JC Flowers has had negotiations with the Government.
Senior bank executives have been called in to a series of meetings with Minister for Finance Brian Lenihan today.
Mr Lenihan said yesterday that "informal approaches" had been made by several potential investors. However, he refused to be drawn on the issue of recapitalisation, adding: "I am not going to pre-judge those discussions at this stage."
Every option had to be examined to ensure an "adequate line of credit" was available to business and consumers, he said. He would take whatever action was needed. He said it was "desirable" that banks access private funds first to deal with their capital issues. "It is not the function of the Government to fund or bail out the banks."
Shares in Anglo Irish Bank and Bank of Ireland, which have suffered in recent days, rallied on potential fresh investment. Both banks climbed above €1, but Anglo later fell back, closing up 10.6 per cent at 92 cent a share. Bank of Ireland climbed 12.8 per cent to €1.05.
Mr Cowen told the Dáil that Mr Lenihan had met the governor of the Central Bank, the Financial Regulator and PricewaterhouseCoopers to discuss the accountancy firm's report into the banks' capital and loan positions. The firm has assessed whether the banks have set aside enough capital to absorb higher losses.
Mr Cowen said the report, which was "commercially sensitive" and could not be disclosed, showed the lenders were in excess of their regulatory capital requirements on September 30th, the day the guarantee was announced. He said the report showed that under stressed scenarios capital levels would remain above regulatory levels up to 2011.
However, Mr Cowen said that "international market expectations" on capital had altered. "Meeting these expectations may be challenging, with consequences for the sector and the wider economy," he said.
"We are not rushing into the banks like some governments in other countries without knowing precisely what the position is," he said.
In a further sign of tightening lending in the banking sector, KBC Homeloans, the State's fifth-largest mortgage lender, said it was reducing the maximum amount it was willing to lend to home buyers.