Bank of Ireland's decision to hand over almost 16pc of its shares means that both it and AIB will be majority State-owned within a few months.
Just over a week ago, Bank of Ireland announced that it was issuing 184 million new shares to the Government.
The new shares gave the Government a 15.7pc stake in Bank of Ireland.
Bank of Ireland was forced to issue the new shares when the EU prevented it from paying the Government the €250m interest it was due on its €3.5bn of preference shares in cash.
The Government purchased €3.5bn of preference shares in both AIB and Bank of Ireland last year in a move that saw it inject a total of €7bn into the two main banks.
At the time, the Government justified taking preference shares rather than ordinary, ie voting shares, on the grounds that they paid an 8pc interest rate.
This would have meant that AIB and Bank of Ireland would have each had to pay €280m a year interest on their preference shares. Now the EU has spoiled the party by insisting that banks receiving State aid can't pay interest on their bonds or preference shares in cash.
This triggered a clause in the agreement between the Government and Bank of Ireland, the interest on AIB's preference shares doesn't fall due until May, forcing Bank of Ireland to pay the interest due on the preference shares in ordinary shares.
Why should Sean and Mary Citizen be worried if Bank of Ireland pays the interest on its preference shares in ordinary shares instead of cash?
Surely this is just high fallutin' finance of no interest to anyone except bankers, politicians and senior civil servants?
The Bank of Ireland move was merely one part in an extremely complex jigsaw puzzle that will almost certainly result in the State taking majority ownership of the two main banks at enormous cost to the taxpayer over the next few months. As the casualty reports pour in from the Commercial Court, with 70pc, 80pc and even 90pc writedowns, it is becoming ever clearer that the 30pc discount originally envisaged on the €77bn of bad property loans that NAMA plans to buy from the Irish-owned banks is far too generous.
This is almost certain to mean that NAMA will insist on deeper discounts on these loans, which will, in turn, crystallise into even greater losses for the banks.
These higher-than-expected losses will, in turn, force the banks to raise even more capital.
Both AIB and Bank of Ireland are currently desperately trying to raise private-sector capital. AIB hopes to sell its shareholdings in US bank M&T and Polish bank WBK Zachodni. This would raise it €3.8bn at current market values.
Even if AIB can get this sort of money for its overseas assets, the bottom line is that it is going to need even more capital, much more. With the share prices of both AIB and Bank of Ireland glued to the floor, the notion that either of the two banks can raise more than a fraction of the capital which they desperately need from the private sector is wishful thinking.
While NAMA takes the banks' bad property and construction loans off their books it does nothing about the almost €150bn of residential mortgages which they have lent.
With house prices down by almost 50pc it is as clear as daylight that all of the Irish banks are going to have to take hefty writedowns on their mortgage loan books.
Investors are well aware of the deteriorating quality of the Irish banks' mortgages.
They aren't going to put a penny into either AIB or Bank of Ireland until the two banks come clean on the quality of their home loans.
In practice, this means that, having already pumped €11bn of fresh capital into the banks, the taxpayer will soon find herself forking billions more to keep our bankrupt banks in business.