THE EUROPEAN Commission is “open” to finding a solution over the Government’s entitlement to a dividend on its €3.5 billion investment in each of the two big banks, according to the Minister for Finance Brian Lenihan.

Sources said talks between Bank of Ireland, the EU and the Government were progressing slowly as they seek a way to pay a €280 million dividend due on Monday from Bank of Ireland on the State’s €3.5 billion investment.

Mr Lenihan told Labour finance spokeswoman Joan Burton in a letter the dividend due from the bank was unlikely to be met, as the EU had blocked all dividend payments while it considered the bank’s restructuring plan.

The bank said yesterday that it would not pay a coupon on bonds due on March 3rd following the commission’s dividend stopper.

Discussions on finding a means of paying the State the dividend may proceed over the weekend.

The bank must pay the Government in ordinary shares if it cannot make the payment.

The commission’s dividend stopper could lead to the State taking a substantial stake in the bank through ordinary shares.

John Corrigan, chief executive of the National Treasury Management Agency (NTMA), which manages the State’s investment in the bank, said last week that it was “preferable” to be paid in cash.

Meanwhile, The Irish Timeshas established there are four investment banks in the frame to partly-underwrite or guarantee a rights issue sale of new shares at Bank of Ireland to generate fresh capital.

Citigroup, Deutsche Bank, BOI’s corporate finance adviser Credit Suisse and the bank’s broker UBS are being lined up to manage the rights issue in the second quarter of the year.

The bank is planning to raise €2.5 billion from a rights issue, coinciding with a debt-for-equity swap and converting part of the State’s €3.5 billion investment in preference shares into ordinary shares.