The Central Bank and Department of Finance are working on a bank resolution regime which could force even senior bondholders to take losses in the event of a future banking collapse.

The outlines of a new rulebook on who takes the hit when a bank fails are taking shape, as Central Bank lawyers investigate best practice in other jurisdictions and seek ways to apply them in Ireland.

Early indications suggest new legislation, which could come as early as 2011, will offer less protection to senior bond investors, leaving them more exposed to potential losses if a bank becomes insolvent. Under current Irish law, senior debt ranks pari passu, or equal, to deposits.

Other elements of the resolution regime could include rules on compulsory transfer of assets and a pre-packaged 10-year liquidation scheme for bankrupt banks.

Officials are understood to be incorporating best practice recommendations from the IMF, the European Commission and the Basel Committee on Banking Supervision, which sets global rules for financial institutions. Officials are also examining legal structures in the US, UK and Germany, where the law differentiates between senior bondholders and depositors.

The move comes after weeks of debate over whether Anglo Irish Bank should "torch" its bondholders to reduce the cost of its bailout by making creditors absorb some of the bank's losses. Last Thursday, finance minister Brian Lenihan confirmed that obligations to senior bondholders, who hold €4.2bn of Anglo's debt, would be met despite the end of the guarantee last week. However, subordinated debt investors are going to be offered an exchange deal on their €2.4bn of bonds, which have lighter legal protection.

Holders of Anglo subordinated debt will be made to absorb 'stress' scenario losses if they don't participate in the bank's forthcoming liability management exercise to buy back the debt at a deep discount, informed sources said.

The move comes as the minister for finance prepares special legislation, to be introduced in the coming weeks, to address 'burden sharing' at Anglo and Irish Nationwide, which is expected to include far less favourable terms for unprotected bond investors than are likely to be offered in an exchange.