Leading experts believe the news that Quinn Insurance is to face a fine of €3.4m is proof the regulator and government have lost control over a deepening crisis and that part-nationalising the banks is now inevitable.

A senior adviser at the Organisation for Economic Cooperation and Development (OECD) said he was "surprised" the Irish government and Central Bank had not yet announced a plan to put money into the banks to help keep them lending.

Other independent Irish banking experts now believe the Quinn crisis will force the government to take control of the wider crisis by buying stakes in the banks.

Peter Hoeller of the OECD said it would be an opportune time to have the "machinery in place" to re-capitalise the Irish banks, as Irish bank shares have continued to slide despite the government announcing its €485bn state guarantee scheme three weeks ago.

Independent analysts have expressed frustration at the way the Department of Finance and the Central Bank are handling the crisis and the state's guarantee scheme is quickly becoming an irrelevance. Professor of finance at Trinity College Dublin Brian Lucey said the regulator's handing of Sean Quinn's shareholding in Anglo Irish showed the seriousness of the banking crisis.

Lucey said the regulator had more to do with PR than addressing re-capitalising the lenders through the national pension reserve fund.

Mark Hutchinson, at the Centre for Investment Research at University College Cork, said: "The sooner they re-capitalise the banks the better. Hopefully, the Quinn news will make the regulator and government face up to the stark facts."

Dr Elaine Hutson of UCD School of Business said international investors were losing confidence in the Irish regulator and the government. "That is why Irish bank shares are falling."

Professor of finance at NUI Maynooth Gregory Connor said, though he was sympathetic to the crisis Brian Cowen faced three weeks ago, "most academics say the Irish banks need capital, not insurance". "It is a great time for the state to buy capital in the banks," he said.

Lucey said the regulator had "many questions" to answer about Sean Quinn and Anglo Irish.

The regulator had allowed Quinn to build a huge stake in Anglo Irish through highly risky bets, he said, and then allowed Quinn to transfer this into real shares in the bank.

Philip Lane, professor of macroeconomics at TCD, said bad loans at the Irish banks remained the issue here. But overseas, he said, expectations of the amount of capital the banks will need to hold was rising all the time.

A spokesman for the Central Bank said its position was that though Irish banks, from a regulatory capital viewpoint, did not need extra capital, it recognised "the rules of the game" were changing.

There are other signs the state guarantee is not working. Irish banks still have to offer the highest sterling, euro and dollar deposit rates in the world to attract deposits.

An analysis by the Sunday Tribune (using comparative website Moneyfacts.co.uk), shows Anglo Irish was on Friday offering among the highest saving rates in the world to attract deposits in Britain and the Isle of Man, despite the state guarantee scheme that gives an unlimited guarantee for all deposit holders and bond holders.