Minister for Finance Michael Noonan is considering imposing losses on some subordinated debt in Bank of Ireland to help the lender generate the €350 million in capital it needs by the end of December.

In a statement this morning, the Department of Finance said Mr Noonan was looking at the measures available to him, including

the possibility of applying to the courts for a subordinated liabilities order that would write down the value of the debt by up to 100 per cent.

Such an order would generate the required €350 million.

The department said he had not yet made a decision on the matter, and was seeking written submissions from interested parties.

The move comes just two days after Bank of Ireland offered to buy back up to €1 billion worth of mortgage

debt at a significant discount to help meet its capital targets under an EU-IMF bailout.

Stress tests in March showed Bank of Ireland needed to raise an additional €4.2 billion in core tier capital to bullet-proof its balance sheet against future property-related losses. So far, it has generated €3.85 billion towards that goal, most of it by imposing losses on junior bondholders and through a €1.1 billion investment by a group of North American investors, who now own 35 per cent of the bank.

Additional reporting: Reuters