THE DEPARTMENT of Finance is understood to be considering budget measures that would boost Irish banks' cash in a bid to ease the pressure of the credit crisis.

According to industry sources, there have been talks between departmental officials and the financial services industry on the possibility of introducing some measures in the budget that would increase banks' liquidity.

Such a move would increase the banks' ability to lend money and take some of the pressure off the ailing property market and other sectors of the economy suffering from the global financial meltdown.

It is not clear what form such measures would take if Minister for Finance Brian Lenihan were to introduce them in next month's budget.

Sources say that the banks themselves want to play down any such move to improve liquidity as they fear it would send the wrong signal to the markets.

"They're worried that people will think there is something really wrong," one said yesterday.

While their share price and earnings have suffered over the last year as global and domestic conditions have worsened, Irish banks have maintained that they have no exposure to the high-risk mortgage-backed securities that sparked the crisis a year ago.

Irish banks borrow on the wholesale money market from other banks, mainly in Europe and the US.

They use the cash to fund some of their own lending activities.

The credit crisis has made this cash more expensive and harder to access, resulting in what banks call a lack of liquidity.

This has limited Irish banks' ability to loan money, making credit more expensive and cutting the amount of money available in the economy for investment. This has aggravated the slowdown that struck the Republic last year.

A department spokesman would not comment on the proposals, saying it was policy not to discuss any possible budget measures before the Minister announces the package.