Ireland Considers Bank Aid in ‘Certain Circumstances’

By Dara Doyle

Nov. 29 (Bloomberg) -- Ireland’s government said it may invest with other parties in the nation’s banking system as the country’s lenders seek to shore up capital depleted by the global financial crisis and the end of a decade-long property boom.

“In certain circumstances it would be appropriate for the state, through the National Pensions Reserve Fund or otherwise, to consider supplementing private investment,” Finance Minister Brian Lenihan said in an e-mailed statement late yesterday.

Lenihan, speaking after meeting executives from the country’s six biggest lenders in Dublin, said he hadn’t made any proposals on mergers between the lenders.

The Irish Association of Investment Managers, whose 12 members manage about 260 billion euros ($331 billion), said this week it had approached Lenihan on behalf of a “number of investment institutions” considering injecting money into four publicly traded lenders. The Dublin-based association hasn’t identified the institutions.

Ireland’s banks are facing rising losses on property loans and falling profit amid the seizure in global credit markets. While the government has guaranteed the deposits and borrowings of its six biggest lenders, it has so far stopped short of following other European states and investing in the banks.

Lenihan “welcomes the views of a number of institutions that they are open to raising additional capital,” he said in the statement. “For certain institutions the need for additional capital may be very modest, whereas for others the need may be greater.”

The banks will work with investors and the government to “develop matters” by the end of the year, he said.

Dublin-based Bank of Ireland Plc, the country’s biggest bank by assets, said on Nov. 24 it had received “unsolicited approaches” from bidders looking to buy stakes. Buyout firms including J.C. Flowers & Co., the Carlyle Group and Irish hedge fund Cardinal Asset Management approached the Irish government about investing in the Dublin-based bank, the Irish Times has reported.

The government may draw on a national pension fund which was valued at 18.7 billion euros ($23.8 billion) at the end of the third quarter. Created in 2001 to finance future pension payments, the fund began by investing in stocks and bonds, and has diversified into property, private equity and commodities.

To contact the reporter on this story: Dara Doyle in Dublin at ddoyle1@bloomberg.net