The recapitalisation of the banks will have to cater for additional losses caused by mortgages and other types of loans, the Central Bank predicted yesterday.
The Irish banks have loaned out about €100bn of mortgages, with the UK and European banks based here lending €51bn in home loans.
A so-called "second wave" of losses on these loans could have serious implications for the banks, although mortgages tend to default at far lower rates than commercial property loans.
Maurice McGuire, chief economist with the Central Bank, said the extra capital would deal with "an element of prospective losses'' not just from commercial property, but also mortgages and other loans. He said that was his understanding of what was envisaged.
He said it was entirely predictable that there would be losses beyond just those associated with NAMA. The Government included powers to put residential mortgages into the toxic loans agency in the NAMA legislation.
But so far the banks have not expressed any major concerns over mortgage losses, simply saying that historically, losses in this area are lower than other forms of lending.
The bank said yesterday in its quarterly statement that further loan losses are likely even after the transfer of loans to NAMA. As a result extra capital would be needed, either from Government or the private sector.
The bank said the transfer of assets to NAMA would reduce "market uncertainty" and ease funding conditions.
Mr McGuire refused to comment on the chances that the Irish banks could attract private sector funding through a rights issue.
"The exact amount of extra capital that might be required from the State will depend on a number of factors," said the bank. Its statement said the environment for Irish banks remained very challenging.
Irish banks claim there is still a chance they can raise money from private sources, particularly once NAMA starts moving soured loans off their balance sheets. But some academics remain unconvinced. Morgan Kelly, an economist from UCD, said recently: "The Irish banks are still zombies, reliant on transfusions of ECB funding to survive until losses on mortgages and business loans finally wipe them out."