Ireland says looking at all options on banks

DUBLIN (Reuters) - The Irish government is keeping all options open on support for its banking industry, Prime Minister Brian Cowen said on Wednesday, playing down media reports of an imminent recapitalization plan.

"International market expectations in relation to capital levels in the banking sector have altered and ... meeting these expectations may be challenging," Cowen said, adding that there was no single solution to the problem.

The banks will explore possibilities for meeting higher capital needs by raising capital privately and disposing of assets, Cowen told deputies during a parliamentary debate.

The central bank said it had held talks with the finance ministry and the financial regulator on Tuesday night and the Irish Independent newspaper said the government intended to inject public money into the banks. The finance ministry declined to comment.

"The pace of something happening has stepped up a gear," said Anna Lalor, analyst at Goodbody Stockbrokers.

Shares in Irish banks soared after the Irish Independent report, reversing some of their recent heavy losses.

"It's very much retail investors buying into speculation in the press today of some sort of restructuring of the Irish banks," a Dublin-based trader said.

Ireland was one of the first to respond to the credit crunch with a guarantee for bank liabilities worth some 440 billion euros ($556 billion), but it has not bailed out or nationalized any banks, and they have not raised equity themselves.

Asked if there would be a bank recapitalization, Cowen said: "The government are considering all options in relation to these matters."

FOREIGN INTEREST

Cowen said an audit of loan books of the six Irish institutions covered under the scheme, conducted by PricewaterhouseCoopers, showed the groups were "in excess" of regulatory capital requirements as of end-September when the guarantee scheme was announced.

"The PwC report demonstrates under a number of stress scenarios that capital levels in the covered institutions will remain above regulatory levels in the period to 2011," Cowen said.

The Irish Independent said Finance Minister Brian Lenihan had a number of options to recapitalize banks, including buying ordinary shares, preference shares -- which would allow the state to receive a divided -- or co-investing with private money.

The Irish Times said separately the government was in discussions with a number of international investors, including several private equity firms, about injecting fresh capital into Irish banks following deep falls in their shares. The approaches included interest from Europe and the Middle East, it said.

Private equity investor JC Flowers has been in "tentative" contact with the government about the possibility of buying into a bank, with an investment in Bank of Ireland considered possible, the Irish Times said.

Bank of Ireland and JC Flowers both declined to comment on what they said was speculation.

Last week Bank of Ireland Chief Executive Brian Goggin said he could not rule out raising equity, but it was not on the agenda at that moment.

(Editing by John Stonestreet, Rupert Winchester and Hans Peters)