Banks vital to economy: Central Bank chiefWednesday 21 January 2009 22.17
Central Bank Governor John Hurley has said it is essential that AIB and Bank of Ireland are secure as they are vital to the economy.
Mr Hurley told the Joint Committee on Finance and Public Service that recapitalisation and the bank guarantee scheme should be used first before any other option is considered.
Shares in the two big banks have been in freefall since the Government moved to nationalise Anglo Irish Bank.
Today, Mr Hurley insisted AIB and Bank of Ireland are strong and solvent and their share prices do not reflect their worth.
He said fear stalks the markets and financial institutions had lost the confidence of investors.
Pressed by deputies on whether more drastic action is needed to stabilise them, Mr Hurley said recapitalisation and the bank guarantee scheme should run their course and then, he said, whatever is necessary will have to be done.
On regulation, Mr Hurley said significant changes are needed in the way we police our banks.
And he repeatedly said that for Ireland to recover from the downturn, competitiveness would need to be restored and any pay developments would have to be considered in this context.
Intensive regulation needed: Farrell
Earlier, the Chairman of the Financial Regulator told the committee that the authority is working to ensure that nothing like the Anglo Irish Bank controversy could happen again.
Jim Farrell said that in hindsight, different action should have been taken but it was a different environment.
He said the previous form of regulation had placed responsibility with banks' boards and senior management but that did not work.
Mr Farrell said more intensive regulation was now required and he said the authority had stepped up its checks on the six banks covered by the bank guarantee.
Minister for Finance Brian Lenihan earlier stressed that there were no proposals before him to nationalise AIB or Bank of Ireland.
Asked if he would rule out nationalisation of either institution, he said that ‘this is not a matter of soundbites ... it is not a situation where we will have policy by soundbite’.
He said that he wanted to assure people around the world that the Government stands behind the banking system.
Minister Lenihan also said that he has always made it clear that nationalisation remains a last and final option.
Responding to a call from Larry Broderick of the IBOA that the Government show a strategic plan for the sector, Minister Lenihan said that he has a strategic plan that has been outlined many times.
Mr Lenihan was speaking as he arrived to address a conference on finance in the aviation sector being held at the Four Seasons Hotel in Dublin.