Mr Lenihan told the Oireachtas Finance Committee that nationalisation was not the short-term panacea envisaged by some.
He said a commercially focused banking sector would be best placed to deal with the current challenges.
However, he added that if banks require further capital this will come in the form of an equity stake thus increasing State ownership of banks.
He said legislation to establish the National Assets Management Agency will be published in July and the Dáil could be recalled early from the summer recess if necessary.
Interim NAMA Director Brendan McDonagh said it was not possible yet to say what the valuation will be placed on loans.
Their early information is that the majority of loans are 'bespoke' - tailored to individuals with unique legal conditions.
Mr McDonagh said the EU has advised that in the absence of a market for loans which could be used as a benchmark for valuation, a transfer value may be assigned.
EU approval will be needed before the legislation is finalised.
Loans
€60bn in loans and between €20 and €30bn of collateral assets will be transferred.
He said many developers are 'multi-banked' meaning they have loans across several institutions.
The details of loans furnished to NAMA yesterday from the six covered institutions will detail for the first time the exposure of individual developers.
He said NAMA was not in the business of liquidation but developers who do not comply with NAMA will face the full legal consequences.
Dr Peter Bacon, who advised the Government on setting up NAMA, said it was important to take all development loans into NAMA including performing loans along with distressed assets in order to give certainty to investors.
He said it did not matter whether the loans resided in the banks, overseen by NAMA, or whether they transfer fully to NAMA.
The critical point is that NAMA provides the strategic direction.
He said NAMA would act as a disinterested party between the borrower and the lender.
