The government is expecting Irish banks to play a further part in helping the state to borrow up to €25bn this year on the international bond markets.

Irish financial institutions hugely increased their
take-up of Irish government borrowing last week during a key debt auction. All the main Irish banks are believed to have taken part.

Meanwhile the country's largest bank, AIB, is expected to announce tomorrow that its Irish bank operations are losing about €1.3m a week because of escalating bad loans.

Brokers expect the bank to announce its Irish branches lost about €72m last year, after having to put aside €1.3bn to cover bad loans. Chief executive Eugene Sheehy is expected to resist calls for him to depart the bank.

This will be a tense week for the country's banks as rumours abound around the markets about their deposit levels. US economist Nouriel Roubini, known as Dr Doom by his critics, has also questioned whether Ireland will be able to cope with the scale of bank liabilities it has taken on.

Irish banks and other Irish institutions took up an unprecedented 40% of the €4bn raised last week on the bond markets. The Irish banks in turn can lodge the bonds with the European Central Bank for fresh
funding for their own operations.

The government declin­ed to comment on whether it requested the banks to participate as part of the guarantee scheme but a source said the NTMA (National Treasury Management Agency), which organised the auction, was happy at the level of participation by homegrown institutions.

While the banks have said there is no pressure on them to take up Irish government debt as quid pro quo for the guarantee scheme and recapitalisations, informed market sources have
told the Sunday Tribune that they "have to show a willingness" and were expected to "lead demand" in a tough market.