Irish banks closed sharply lower Tuesday as investors expected that the institutions could be nationalized or sold on the cheap to cut the government's bailout costs.

Patrick Honohan, the governor of the Central Bank of Ireland, said Tuesday that "the banks are for sale as far as I'm concerned," and that they could be offloaded to a foreign buyer. He previously said the banks could be "overcapitalized" to reassure investors and guard against further loan losses, but Tuesday said that this solution is costly.

Observers were at a loss to identify any banks that might be interested in buying, but specialist buyers such as J.C. Flowers & Co., which has bought into troubled financial institutions in Europe and the U.S., could be interested.

The U.S. investment firm has just failed to reach the shortlist for the troubled EBS Building Society of Ireland. J.C. Flowers remains very interested in developments in the Irish banking sector, was watching the situation closely and would respond to opportunities as they arise, a person close to the firm said.

Veteran U.S. investor Wilbur Ross who, in a consortium with Carlyle Group and Cardinal Group of Ireland, remains in the auction for EBS, recently told Dow Jones Newswires that he continues to see opportunities in the Irish and U.K. banking sectors.

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