Minister of Finance Brian Lenihan said today the Government is seeking to maintain a "private presence" in the ownership of Irish banks.
Speaking at a conference in Dublin this morning, Mr Lenihan the State would expect to have "a substantial stake" in the combined company that might emerge from talks between EBS and Irish Nationwide Society.
He also confirmed that a possible merger was highly likely.
"I did meet the board of Irish Nationwide recently and they indicated their interest in discussions with EBS and it is a matter now for those discussions to take place," Mr Lenihan told reporters.
Mr Lenihan's comments came as EBS chief executive Fergus Murphy confirmed that talks between the EBS and Irish Nationwide Building Society will likely begin this week.
Tlking to reporters, Mr Lenihan said the State would expect to have a substantial stake in the combined company that might emerge from the talks.
Mr Murphy said today that a deal between the two financial institutions may be agreed early next year when they receive capital from the Government, which may take a stake of between 40 per cent to 60 per cent
EBS needs an additional €100 million of capital to shore up the building society against losses said Mr Murphy. It also needs €300 million to bolster its own capital.
Combining the two lenders would add to EBS's deposits and assets and reduce its loan-to-deposit ratio, Mr Murphy added.
Trade union Unite called for the interests of staff to be given a high priority in talks on the possible merger.
"We have a solid and robust relationship with management at EBS and have always been able to resolve issues that have arisen," said Colm Quinlan, regional officer with Unite.
"We will expect to be kept fully briefed as and when any discussions commence with regard to possible mergers within the Irish financial sector."
Irish Nationwide has retained investment bank Goldman Sachs to advise the building society on the potential merger of the society’s residential loan book.
Speaking this morning, Mr Lenihan also said that while the new National Assets Management Agency (Nama), "is not without risks," it will help to stabilise the financial system.
The Nama Bill was signed by President Mary McAleese yesterday. The aim of Nama is to take large loans related to property development and land speculation away from domestic banks. The agency will pay €54 billion for the loans.
Irish Nationwide is selling about 80 per cent of its loans to Nama
Additional reporting: Bloomberg
