Bank of Ireland has told Dublin stockbrokers it will be moving towards holding higher levels of equity capital more in line with British banks as it seeks to recover from huge losses associated with the credit crunch and property crash of the past two years.

In a series of meetings to discuss the bank's interim results last week, chief executive Richie Boucher and other executives indicated that, while previously they felt a 6% equity ratio was sufficient, they are now leaning towards 8% to satisfy emerging market and regulatory norms.

As of the end of September, the bank's equity tier 1 capital ratio stood at 6.6%, despite the bank recording an underlying loss of nearly €1bn after impairment provisions of just under €1.8bn.

The transfer of up to €16bn of property development loans to Nama in 2010 will put further strain on capital, as the discount applied by the government will have to be written off against reserves.

Finance minister Brian Lenihan estimated in September that an aggregate industry-wide discount of 30% would apply to the five banks involved with Nama. At the time, Bank of Ireland indicated its haircut would be substantially below this figure, but Boucher backed off this assertion last week when presenting the half-year figures.

Continued losses until 2011 will also put pressure on the capital base. According to analyst consensus, Bank of Ireland will have to raise about €1.4bn in new equity just to hit a 5% core equity ratio at the trough of the cycle. To hit the new target of 8% will require a much larger capital injection.

However, industry consensus is now putting the earliest date for a rights issue at April 2010. Whereas some expectation built up recently among analysts and investors that Bank of Ireland might proceed with a rights issue by the end of this year, that has now been ruled out by circumstances.

It is almost certain that loans will transfer to Nama in January at the earliest and not in December as envisaged. With the final form of the Nama bill expected to be made law on Thursday, there is not enough time for banks to organise the necessary shareholder meetings to secure approval before Christmas.

Meanwhile, the European Commission is not expected to approve the Irish banks' business plans until the end of the first quarter next year. Only then will the banks have sufficient visibility on operating profits to be able to put a proposition to investors.