Irish banks offered billions of euros in non-recourse loans to syndicated property investors who may now decide not to continue paying back their loans as the value of the assets has collapsed.

A senior figure in one of the leading private equity companies in Dublin said the banks' private equity divisions regularly offered non-recourse loans, occasionally without asking for personal guarantees, because "they needed to get people through their doors. They had to do it."

In 2007, for example, the now nationalised Anglo Irish Bank sought €255m from investors for its Select Geared Property Fund with a view to adding non-recourse bank borrowings of €339m to complete the fund. The fund's assets include stakes in a retail scheme on South King Street in Dublin 2, the Northern Quarter scheme planned for Arnotts and a shopping centre in Liverpool. The fund has a target investment period of five to 10 years. The remaining stakes were owned by individual in­vestors including the McCormack family's Alanis Capital, Green Property and Bernard McNamara's Grattan Property Company. "This investment is high risk," the prospectus stakes, adding later that the "borrowed monies are non-recourse. They are secured individually on each property or investment."

Syndicated property investments proved popular in Ireland because banks often loaned the equity required to invest in the fund. In many cases, investors only had to pay €6,500 a year to borrow €100,000.

That €100,000 was then geared up to €500,000 by the banks on a non-recourse basis while the interest bill on the non-recourse borrowings was rolled up. While the market boomed it proved hugely profitable but now many investors have seen their €100,000 wiped out and the banks face a headache recovering the monies.

Some funds are in serious trouble with cash calls being made to investors for additional equity, with some investors reputedly ignoring the calls.

Those that invested in land are particularly badly affected because it produces no income to help service the debt.