DUBLIN (Reuters) – Splitting Ireland's nationalised Anglo Irish Bank into an asset management company to manage its bad assets and a "good bank" for the rest is the cheapest option, the country's regulator said yesterday.

Alternatives, including winding the bank up, would cost the tax payer more, Matthew Elderfield said in his first appearance before a parliamentary committee.

"My own view is that the costs of a rapid wind up of the bank would be prohibitively expensive and that the structure that is being developed is a reasonable way to minimise the costs to the taxpayer," he said.

Citing the example of Northern Rock — which was nationalised after becoming the first British casualty of the credit crunch — he said advantages included that the rump could continue running as a bank and that the approach would avoid panicking investors.

Anglo Irish is among the financial institutions transferring property loans to Ireland's National Asset Management Agency (NAMA), set up to cleanse banks' balance sheets.

Elderfield stressed the need for ongoing work in revamping Ireland's regulatory authority and reiterated earlier comment he was taking an assertive approach.

Appointed last year, Elderfield said one of his biggest surprises had been the lack of resources.

To tackle that, he said he had approval to hire another 150 staff this year and estimated around 200 more would be needed after that.

Answering concerns raised by the European Central Bank, Elderfield said he felt fully independent.

"I think it's possible to be independent. I have not had any direction from the government," said Elderfield, who is head of financial regulation at Ireland's central bank.

NAMA on Tuesday lowered further the price it expected to pay for the risky property loans.

Elderfield said the concern was to ensure there was "no second act".

In their assessment of the scale of the bank's needs, the authorities had been at pains to factor in all the bad news and carried out "a serious process", including a very exacting stress test.

"I would say our stress test requirement is tougher than the US and UK because we know that the economic situation in Ireland is pretty difficult," he said. "We think it's prudent to look at the half-empty glass."