Fears over whether the European Commission (EC) would delay sanctioning an extension to the state's bank guarantee led to an outflow of funds from the Irish banks and persuaded the government to bring forward its announcement of the recapitalisation of AIB, according to senior political sources.

The drama hit the Irish banks over two weeks ago in the middle of negotiations between the government and the EC, when Brussels appeared to be slow in agreeing to the extension of the guarantee. Some large corporations, it is believed, moved funds out of Irish banks.

"[But] as soon as agreement came through from Brussels, there was no problem," said a senior source.

The government then decided to bring forward its announcement of the recapitalisation of AIB and the inevitable effective nationalisation of the bank.

Banking and government sources said that the Irish banks smoothly completed the refinancing of the huge amounts of bonds through September, a consequence of the 'bunching' of the bonds they issued that were due to expire at the end of the first two years of the state guarantee.

However, AIB in the early part of the year was forced to tap an emergency loan from the Central Bank when technical difficulties led to its failure to tap the European Central Bank (ECB) for funds.

The ECB is providing large amounts of day-to-day funding for all Irish lenders.

The Central Bank and the Department of Finance would not comment.

The effective nationalisation of AIB will also transfer the bank's major legacy issues on to the state.

In a long-standing suit in a Manhattan court, AIB is suing Citibank and Bank of America for $480m, alleging they conspired with rogue trader John Rusnak up to 2002.

The government may have to decide whether it should push for a speedy settlement of the case.

The Sunday Tribune reported last year that Bank of America and Citibank, which is counter-suing AIB, had planned to call the testimony of 45 expert witnesses in Ireland and across the world.