Honohan Sees Private Investors ‘Scrambling’ for Irish Banks

Irish central bank Governor Patrick Honohan said investors will be “scrambling” to support the country’s banks after they exit the current financial crisis.

Honohan anticipates capital being injected into the banking system in 2010, he said at an event in Dublin today, without saying where he expects it to come from.

“The whole process of National Asset Management Agency purchases, careful evaluation of the capital needs of banks, capital injections, I expect that to roll out over the next number of months,” said Honohan.

Ireland is setting up NAMA as a so-called bad bank, which will buy toxic property loans from the country’s lenders at a discount of about 30 percent. That will leave Bank of Ireland Plc and Allied Irish Banks Plc, the country’s two biggest lenders, needing capital, and the government has said it’s “committed” to supporting them.

“Irish banks are going to leave this situation well capitalized,” said Honohan, who is also a member of the European Central Bank Governing Council. “In due course, there will be private capital scrambling to get into Irish banks” because they will “be so strong,” he said.

Extra reserves of about 30 billion euros ($44.4 billion) would have shielded Irish banks from the global credit freeze, the drying up of credit on international money markets and surging bad debts, Honohan said.

Bank of Ireland Plc fell 2.1 percent to 1.61 euros at 12:33 p.m. in Dublin, while Allied Irish Banks Plc declined 2.2 percent to 1.53 euros.

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