He also told the committee that he would have applied a greater proportion of risk-sharing to the banks under the NAMA scheme.

 

Under the scheme, 5pc of the total to be paid to the banks for their loans, around 2.7bn euro, will be in the form of sub-ordinated bonds, meaning that they will be at risk to the bank and dependent on the performance of NAMA. The governor said he would have gone 'a lot further' than the 5pc, possibly up to around 15pc. And he said finance minister Brian Lenihan would have been aware of his views on this. He reiterated that, more generally, he was determined to strengthen financial supervision to correct the damage to Ireland's reputation caused mainly by scandals surrounding Anglo Irish Bank. He said Ireland should not be allowed to become a "soft option" for firms that are not welcome elsewhere. "Specific steps need to be taken to ensure that there is no expectation that the state would come in to take exceptional steps to rescue such entities," he said. He also confirmed he was considering charging firms the full cost of their supervision. But he said a report last month which quoted him as criticising the government's cap on bankers' pay had misinterpreted his remarks. "Actually, I'd rather bankers' pay was actually lower, I don't think we need those wide distributions in general," he said. Professor Honohan also defended the need for public sector wage cuts proposed in the 2010 budget. He told the committee that the wage cuts represented a welcome "internal devaluation" for Ireland. He declined to comment directly on the fiscal problems in Greece but told deputies: "What I would say in terms of our domestic (situation is that) ... part of the consequence of the strategy adopted in the budget is the achievement of what might be called an internal devaluation." "This is positively good and necessary," Honohan said. "For Ireland there has been a fall in prices, price stability in Europe has been achieved but in Ireland prices have fallen, there needs to be an adjustment ... in wages." Honohan was speaking as the Dail debated the bill entitled "Financial Emergency Measures in the Public Interest (No. 2)" which will enshrine wage cuts in law.