By Padraic Halpin
DUBLIN (Reuters) - Ireland would like a "significant" new bank with a big balance sheet to enter its lending market this year to drive competition in the diminished sector, finance minister Michael Noonan said on Saturday.
Ireland's banking crisis, which helped push the country into an European Union-International Monetary Fund bailout that it completed last year, led to the closure or merger of half of the country's domestic banks and the exit of a slew of foreign lenders.
It has also left the country with only three SME lenders of scale, state-owned Allied Irish Banks (AIB.IR), Royal Bank of Scotland's (RBS.L) Ulster Bank and Bank of Ireland (BIR.IR), which counts the Irish state as a 14 percent shareholder.
"We are talking about a bank with a big balance sheet... A third significant player," Noonan told reporters at his Fine Gael party's annual conference after he said in a speech that he would like to see a third viable bank in the country.
"I'm exploring it. I know there are people interested. In the course of this year, it would be nice to get these things done before banking union," he said, referring to the European Union's plan for a more integrated banking system.
Noonan added that he absolutely wanted mortgage lender permanent tsb (ptsb) (IL0.IR), currently the third domestic-owned bank in the country behind Bank of Ireland and AIB, to remain part of the banking sector.
Noonan's comments come after Flip, a proposed European bank, kicked off formal fundraising to raise 100 million euros to allow them cash in on Ireland's newly-concentrated banking market and slowly recovering economy.
However Noonan said he was looking for a much bigger lender than Flip and ptsb to enter the market and that he was sending a signal out that there is a space to do so.
"They were talking about 100 million (euros), 100 million wouldn't capitalize a bank," Noonan said, referring to the Flip proposal. "The amount of money they were talking about was far too small."
"There's a general agreement to the principle that the two pillar banks, Bank or Ireland and AIB, are insufficient as players in the market to give the kind of competition that a growing economy might need."
(Editing by Tom Heneghan)