Brian Lenihan has said that the failure of Anglo Irish Bank would "bring down" Ireland, the Financial Times has reported.
In an interview published on the newspaper's website, Mr Lenihan said the bank was "sytemically important" to Ireland and its failure could not be contemplated.
"Any Anglo failure would bring down the sovereign. It is systemically important not because of any intrinsic merit in the bank. But because of its size relative to the national balance sheet. No country could contemplate the failure of such an institution," he told the FT.
The Government is expected to outline the final costs for winding down nationalised Anglo Irish Bank early tomorrow morning and a final estimate of about €28 billion to €29 billion is expected, rising well above €30 billion under a worst case or “stress” scenario.
It is also expected to inject a further €2 to €3 billion of state capital into Allied Irish Banks, the FT reported, without naming any sources. No one at Allied Irish Banks was immediately available for comment.
Allied Irish needs to raise €7.4 billion of capital to meet new Irish regulatory demands by the end of 2010 and sold its 70 per cent stake in Bank Zachodni to Banco Santander for €3.1 billion this month.
Allied Irish, which hopes to hold a rights issue later this year, is also close to selling its 22.5 per cent in US-based MT Bank Corp to Santander, it was reported last week.
The Government has said it stood ready to increase its 18.6 per cent stake in Allied Irish and the Financial Times said Mr Lenihan would make the announcement of fresh capital in anticipation that the bank would be targeted by the markets.
The Financial Times quoted Mr Lenihan as saying issues around Anglo's subordinated bondholders "will be addressed" during tomorrow's announcement, something Mr Lenihan reiterated in the Dáil tonight.
Mr Lenihan also restated to the paper that Ireland would repay the banks senior bond holders in full.
Additional reporting: Agencies