Mike Aynsley and Maarten van Eden

Anglo Irish Bank will not be in a position to negotiate with its bondholders for several more months following last week's decision to split the institution into separate funding and recovery banks, according to a senior Anglo source.

The bank is continuing on a "business as usual" basis since the European Commission rejected management's plan to hive off a "good" commercial bank from the remains of the failed property lender, the source said.

"We now have to completely redesign our business plan and submit it to Brussels for approval," he said. "That doesn't happen in two weeks."

He stressed the bank was not negotiating with senior debt-holders as they were guaranteed by the government and would have to be paid in full. He also said the bank did not yet have permission to engage in liability management exercises such as debt buybacks.

Critics of government policy on Anglo have long advocated "burning" certain bondholders by forcing them to take losses on their loans to the bank.

Prices on Anglo credit default swaps – securities designed to insure against bond default – rose sharply last week ahead of the commission's decision in a sign that investors were worried the bank might renege on its obligations or attempt to negotiate them down. Depositors also voted with their feet, as the bank experienced "material" outflows amid uncertainty over its future, chief financial officer Maarten van Eden said.

The new strategy came as a blow to chief executive Mike Aynsley and his management team, as they had staked a year's work on plans to build a smaller, good bank while working off bad loans via a separate asset management company.

A source close to the negotiations on the bank's future said the department of finance had given its "absolute support" to the good bank/bad bank split, but that the Central Bank and the National Treasury Management Agency had persistent misgivings.

The source said the NTMA wanted to create a funding bank as a "conduit" to credit markets to supplement its own fundraising activities and saw the bank as "another instrument available to them".