Irish banks might need greater flexibility to meet deleveraging targets under an EU-IMF bailout plan, a senior banker said on Wednesday.

Bank of Ireland , Allied Irish Banks Plc (AIB) and Irish Life and Permanent have to cut their balance sheets by 70 billion euros by 2013 to reduce dependence on emergency funding from the European Central Bank.

After successfully hiving off assets this year through a mixture of disposals, repayments and redemptions, next year is expected to prove more difficult due to a deepening sovereign debt crisis in Europe and as European lenders ramp up their own deleveraging plans.

The deleveraging plan went well in 2011. Obviously the headwinds are against us in 2012 with what is happening in Europe in terms of sovereign risk and bank recaps around Europe, said Fergus Murphy, head of restructuring at AIB and chairman of Financial Services Ireland, the trade association for financial services firms.

It may be necessary for some more innovation to be brought to the deleverage plan in relation to structured finance, off-balance sheet structures etc to enable the completion of that challenge, Murphy told an audience of bankers and politicians, including Prime Minister Enda Kenny, in Dublin.

Earlier this month, Ireland's financial regulator said that, if the country's banks were faced with potentially large losses to reduce their assets, then the pace of deleveraging could be slowed.

AIB said on Wednesday it was more than halfway to meeting a 19 billion euros deleveraging target by the end of 2013. AIB has shrunk its assets by some 10.7 billion euros this year and aims to sell loans worth over 1 billion euros by the end of December.

Bank of Ireland said this week it was selling project finance loans to Japan's Sumitomo Mitsui Financial Group Inc <8316.T> for 470 million euros, a discount of 16 percent.

(Reporting by Carmel Crimmins; editing by Andre Grenon)