Colm Doherty is the banking insider who was appointed last December, with the help of other AIB insiders, to run Ireland's largest bank. Doherty, whose career at AIB bank has spanned two decades, including serving as a well-paid main board director for the last six years, was presented as the corporate enforcer who would take the tough decisions to whip a dysfunctional bank into shape in the interests of AIB's remaining band of small shareholders.

In his first 100 days, Doherty talked tough about selling banking operations in Poland and offloading the stake in M&T in the US, part of his plan to raise capital from disposals and other private sources to fill the big accounting holes in the bank. As importantly for the banking executives, Doherty got the job to drive the strategy to stop AIB falling into majority ownership, or worse, full state ownership.

But both Doherty's strategies are looking broken. Last week's ruling by the Financial Regulator requiring AIB and other Dublin banks to raise much more capital and by a tighter deadline than the lenders wanted threatens to end Doherty's career. The regulator's new capital rules and a recession-mired economy will likely lead to the government owning, at the very least, a majority stake in AIB. Many believe that AIB will continue for a few more weeks to moot, as it did last Tuesday, its plans to tap shareholders for rights issue cash. In truth, the amount of capital it will raise from fire-sale disposals will fall well short of what it needs.

Doherty, the corporate enforcer, could increasingly look more like AIB's corporate undertaker, if he and the executive banking board are allowed to pursue a fire sale of assets, experts warn.

AIB's strategy has been to pretend that the interests of taxpayers and those of the bank were aligned. The more money AIB raises from asset sales then taxpayers will surely be called on to pump a little bit less to recapitalise the bank.

But influential commentators are starting to question whether taxpayers will be best served if AIB, the distressed seller, offloads valuable banking operations during the worst banking slump since the 1930s. AIB and its disparate shareholders have most to gain by AIB's spin that its so-called 'self-help' policy also serves the interests of taxpayers.

Typically, as the regulator last Tuesday set its new tougher capital targets, AIB came out fighting. Doherty said that not only was the 70%-owned WBK in Poland and the 22.5% stake in M&T Bank in the US up for sale, but also AIB GB and First Trust in the north were also on the block.

Experts who have accurately predicted the course of the Irish banking crisis say that even as AIB Group is reduced to a mere 26-county stump in Ireland, the bank will creep closer to full nationalisation. "In short, AIB will be at least 75% owned by the government and there is a good chance of full nationalisation down the line," said Karl Whelan, the UCD professor. Another leading commentator, who did not wish to be named, said that the government would "inevitably" end up owning both AIB and Bank of Ireland outright.

Other influential economists say that the case for AIB selling its family silver is increasingly questionable.

John FitzGerald, professor at the Economic and Social Research Institute said it "was not clear" that AIB "should be allowed" to sell off almost all its operations to leave a rump bank in the republic. The bank may be serving the interests of its shareholders, not taxpayers, by selling off most of its operations, he said.

Last week it became obvious that Doherty had lost out in the 'frank discussions' bankers had held with the regulator in recent weeks.

Moreover, the bankers have 30 days to tell the regulator how they plan to hit their capital targets. In AIB's case, the regulator said AIB will need to raise or show how it will raise an additional €7.4bn in equity capital by the end of the year – before the bank accounts for the proceeds from disposals.

The morning after Tuesday's dramatic developments, AIB's Goodbody Stockbrokers said that its "base case" would see asset disposals giving AIB a combined €4.7bn capital gain, reducing the regulator's capital bill from €7.4bn to €2.7bn.

The same morning, Barclays Capital presented a different set of figures showing that AIB's combined total disposals would only contribute €1.7bn to its capital needs. AIB GB and First Trust would even be sold at a loss, destroying tier 1 capital of €470m, Barclays Capital estimated. The sale of WBK would only contribute €1.27bn to the bank's capital, presumably because AIB has invested so much already into the Polish bank. After the disposals, AIB would still face a funding hole of €3.35bn. The Barclays' figures suggest that the prize sought by AIB from the UK sale, however, would be to reduce the bank's risk-weighted assets by a huge €18.4bn, suggesting that AIB, down the line, would need to keep less capital in reserve.

Responding to a journalist's question last month about whether the state would end up taking a majority stake after the regulator set the capital needs for the Dublin banks, Doherty said that AIB was "capable" of raising €4bn from private sources. "I am saying we have a number of very valuable assets that people are materially interested in. We are about doing self-help first. And what our shareholders have said is if you do the self-help we, your shareholders, will be there for you." He said that the consensus across Europe was to have an equity core tier 1 ratio of 8%, but by the end of 2012. "If that is where we are, I think we have a reasonable chance of using the self-help option and raising capital from our shareholders to achieve that target within the prescribed time."

But after last week the pressure is mounting on Doherty, who had long coveted the top job. Much may depend on the price AIB gets for its second and subsequent transfers to Nama. But many people are starting to question whether Doherty's strategy is the best for the taxpayers who will own Ireland's largest bank.