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UK PENSIONERS may be among those to suffer if junior bondholders are burned by Minister Michael Noonan's proposal.

The government is contemplating imposing losses of up to 100pc on junior bonds in Bank of Ireland.

The Minister said he is considering wiping out the value of more than €400m of subordinated debt.

Among the bonds affected are £46m (€53m) of debt sold to pensioners by Bristol and West, the building society taken over by Bank of Ireland in 1997.

Interested parties have until the end of November to make submissions on the possible move.

The bank requires a further €350m to meet the full capital target of €4.2bn set by the Central Bank following the stress tests of the banks in March.

Mr Noonan said he may use emergency powers under banking legislation to inflict losses of up to 100pc on junior bondholders using a Subordinated Liabilities Order (SLO).

Ireland has refused to force losses on banks' senior bondholders, which rank on a par with depositors, for fear of triggering contagion in other eurozone countries.

But billions of euros have been raised towards the cost of bailing out the country's banks by imposing losses on junior debt.

Relations between the government and the bank have deteriorated in recent weeks after the lender refused a request from Taoiseach Enda Kenny to pass on a recent ECB rate cut to variable mortgage holders.