IRELAND'S two biggest banks are to shed more than 2,000 jobs in a move that represents the largest staff cuts in guaranteed banks since the financial crisis began.

Bank of Ireland is expected to announce plans to axe over 1,000 jobs, or one-in-10 of its workforce in the next two weeks. It comes as the European Commission has finally approved the bank's business survival plan.

Meanwhile, Allied Irish Banks is preparing a severance package of its own for about 1,000 staff, according to sources familiar with the situation.

It is understood human resources managers at the bank are working out the details of the job cuts this month, ahead of AIB's interim results announcement on 11 August. The cuts are expected to start in September.

The redundancies, which are being made in a bid to reduce costs and streamline operations in the state-backed banks' struggling domestic businesses, are larger than previously anticipated.

"AIB's results will have to provide a lot of detail to the market," said Kevin McConnell, head of research at Bloxham Stockbrokers. "Cost-cutting will have to be a part of it."

The job cuts may be larger than anticipated because the bulk of the posts will come from inside the retail banking and head office operations. The staff culls will be in addition to the people working in businesses the banks are planning to sell.

"You would want something substantial for all the trouble of putting together a redundancy package," said an institutional investor source.

Bank of Ireland has announced plans to sell its ICS Building Society, New Ireland Assurance and stockmarket investment arm, Bank of Ireland Asset Management. AIB is disposing of its international businesses, including its British bank and stakes in its Polish subsidiary, BZ WBK, and M&T bank in the US.

"They will be very significant job losses because they are separate from the sale plans," a senior banking source said.

A Bank of Ireland spokeswoman said that cutting costs remained an urgent priority for the bank.

"Our costs were down by 11% in the nine months to December 2009 when compared with the same period in 2008. Staff numbers are down 8% by over 1,300 since December 2008 to 14,755 currently," the spokeswoman said.

AIB said the bank had "no advanced plans for redundancies", but did not rule out the possibility of job losses as the bank continued to shrink and restructure according to the wishes of the European Commission and the Financial Regulator.

The bank told shareholders in May that "costs continue to be closely managed and reduced. We are developing a cost-reduction programme that will reset the base to a lower level, reflecting a more streamlined structure more aligned with the bank's reduced size following completion of the business disposals now underway."

A spokesman for the Irish Bank Officials Association (IBOA) said the union had not been briefed on any job cuts, but that management would have to negotiate terms according to previous agreements.