Irish central bank says banks' bad loans remain too high

LONDON, Nov 17 (Reuters) - The level of unresolved bad loans among Ireland (Other OTC: IRLD - news) 's banks remains too high and the recovering economy alone will not be enough to resolve the situation, the outgoing governor of the central bank said on Tuesday.

Ireland's banks, left with tens of billions of euros of bad loans after a property bubble burst in 2008, have started working through their books with Allied Irish Banks (EUREX: 558453.EX - news) reporting on Tuesday a more than 10 percent fall in its stock of defaulted loans in the three months to September.

However Patrick Honohan said the banks have been too slow, "despite sticks and carrots from the central bank", to recognise situations where deep debt restructurings involving some element of financial engineering would result in a better loan-loss performance over time.

"The level of unresolved non-performing loans remains too high," said Honohan, who will be succeeded by fellow economics professor Philip Lane next week, said in the text of a speech to be delivered at London School of Economics.

"As the economy recovers, so too will the debt servicing on some of these loans, but probably not as many as the banks hope. All available policy tools to improve the situation have been energetically deployed, but on the whole have proved somewhat lacking."

In another parting shot to the banks earlier this month, Honohan said more competition was needed to aid an almost creditless economic recovery after a crisis saw some lenders close and others leave the market. (Writing by Padraic Halpin in Dublin; editing by Adrian Croft)