The government and the Central Bank are to pressurise banks to reduce their dividend payouts, sell non-core assets and cut their remuneration after coming to the aid of six institutions afflicted by major liquidity shortages and runs on deposits.
It has also emerged that one of the reasons the government, the Central Bank and the financial regulator deciding against nationalising some of the weaker banks was because policy-makers were worried the exchequer could not cope financially with such a large open-ended commitment.
"There was a real question of whether we could fund these entities in state ownership. We could have been funding them for years," said one senior source.
The relationship between the banks and the government, while cordial, could become strained unless the banks make changes to the way they operate. Dividend payouts of recent months have been unpopular with the government, with one source describing AIB's recent increase as "cheeky".
As a result, dividends are to come into focus as part of a package of measures to make the banks pay for getting the €400bn guarantee last Tuesday.
"It's in the pot, the issue of dividends," said a senior source. "Asset sales have to be on the agenda for any institution that has been struggling, but we don't want to see the banks take a bath on them at the same time." said the source.
Senior sources have told the Sunday Tribune that, by Wednesday 24 September, interbank lending and repo facilities had shut down to Irish banks. These sources of funding had remained open since the credit crisis began in the summer of 2007 and had closed down only once before, during the so-called St Patrick's Day Massacre, in the days after the Bear Stearns collapse when Irish bank shares plunged to then-record lows. This latest crisis was worse, according to the banks.
Although there have been rumours that one or two institutions were on the brink last Monday, sources close to the events leading up to the rescue maintain that the entire banking sector was under systemic risk of total shutdown.
September was the toughest month yet in terms of deposit leakage and fears of a bank run were rife throughout the sector.