The Taoiseach has again told the Dáil that the Government is considering all options on Irish banks and is trying to minimise the exposure of the taxpayer.
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Mr Cowen said he had received a report from PricewaterhouseCoopers which says the six banks covered by the State guarantee scheme had more capital than required by the regulator on September 30 when the scheme was announced. The report also said the banks would have enough capital until 2011.
But the Taoiseach said market requirements had changed and that the banks were looking at raising private capital.
Fine Gael leader Enda Kenny said if capital was provided it should not sit in the banks' vaults. He said it should be used to extend credit and should not be used to support 'delinquent' developers.
Mr Cowen said recapitalisation was not a panacea that would solve all ills. He said that if capital were provided to banks, it would be for capital purposes and would not automatically be used for increased credit lines for Irish business.
Labour leader Eamon Gilmore said the Taoiseach did not grasp the urgency of the situation facing small businesses.
Shares in Irish banks rose strongly today amid increasing speculation that the Government is finalising a new initiative to help the banks.
NCB Stockbrokers says it expects consolidation to occur in the Irish financial sector before any recapitalisation takes place. A note from the broker this morning said the aim of the consolidation would be to create an industry that was stronger and more able to withstand the buffeting the banks will take over the next few years.
Meanwhile, a note from stockbroker Davy said that following talks with AIB yesterday, Davy thinks the bank is intent on constraining loan growth to a minimum, in an effort to put its loan book into line with its diminished capital. This makes it harder for businesses to secure loans.
To stimulate the economy, Davy says, the business plans the banks will submit to Government could give it ammunition to act on their recapitalisation.
On Morning Ireland today NUI Galway economist Alan Ahearne said the Irish banks would need a lot of capital. He said that if they did not receive this, they would have to reduce their loan book so that loans are in proportion to their diminished capital.
The economist said that would crush the economy by starving businesses of loans and credit. He said banks were looking at writing off 1% of their loan books next year, but this seemed very small compared with other countries which had suffered a property crash.
