The Government is expected to use the High Court to challenge a decision by shareholders in Irish Life & Permanent (IL&P) who have overwhelmingly rejected plans to inject billions of euro into the company.
If the vote had been successful at an extraordinary general meeting, the move would have wiped out the remaining value of investor shares.
A group of dissident shareholders, led by Malta-based fund Scotchstone Capital, headed up the campaign against the Government which is planning to put the company in 99pc State control as part of the EU/IMF bailout terms.
But Finance Minister Michael Noonan told RTE that a recapitalisation is the way forward.
We have no choice but to recapitalise," he said.
"There are options which would allow the government to go ahead following a legal route to recapitalise, but it is premature to get into the details."
Faced with nearly €4bn of a black hole, the company relies mainly on funding from the central bank.
IL&P's board had recommended investors agree to the government injecting €3.7bn into the group, wiping out their shareholding and leaving Dublin with over 99pc of the bank.
IL&P was once the only Irish bank to avoid a state bailout because it was not exposed to property developers but when the country’s lenders were locked out of debt markets it became reliant on the central bank.
The €4bn hole was discovered during bank stress tests carried out last March.
As part of plans to clean up the banks, the Government has offered to pump €2.7bn through buying up shares and guarantees before the end of July.
The group is also trying to sell its life business and burning junior bondholders in a bid to raise €1bn but if it fails the State will have to step in.
Meanwhile, the European Commission has given the recapitalisation an initial approval but will have to study the plans further.