Doubts still on euro zone recapitalization for Irish banks: central bank

DUBLIN (Reuters) - Moves to allow euro zone rescue funds such as the European Stability Mechanism to directly recapitalize a member nation's banks are 'encouraging', but a big question mark remains over whether they will apply retrospectively to the likes of Ireland, the country's central bank governor said on Sunday.

"I'm very encouraged by the moves in that direction. But they are slow moves and there is a big question mark over the degree to which they would look back on what has happened in the past. This is something we have to be patient about," Patrick Honohan told national broadcaster RTE.

Honohan, who as Ireland's representative at the European Central Bank struck a key bank debt deal with the ECB this week, reiterated that Irish lenders had not achieved enough on the problem of mortgage arrears, something over which he and colleagues were "tearing their hair" out.

He said progress had been made on getting Ireland's highly recapitalized banks to work more quickly on the problem, yet lenders had not made up their minds on what choices to make to deal with what he called the country's biggest domestic policy issue.

(Reporting by Padraic Halpin and Stephen Mangan; Editing by Greg Mahlich)