The Central Bank has published crucial stress tests on the Irish banks, which show that €24 billion will need to be put into the banks to help them cope with potential losses.
AIB will require a total of €13.3 billion, Bank of Ireland €5.2 billion, EBS €1.5 billion and Irish Life and Permanent will require €4 billion.
The Central Bank also set targets for how much the banks must reduce in size, through a combination of run-downs of assets and sales of assets.
The Finance Minister Michael Noonan later outlined his response to the tests.
Central Bank Governor Patrick Honohan said the aim was to create a sustainable Irish banking system through a combination of recapitalisation, deleveraging and reorganisation.
The stress tests were based on estimates that, in a worst-case scenario, the four banks could lose almost €9.5 billion from residential mortgage loans over the next three years.
In total, the assessment found that the banks could face losses of €37.7 billion over the next three years under the worst-case, or 'stressed' scenario.
The tests found that banks would need €18.7 billion in new capital to meet new Central Bank targets, but the bank also added another €5.3 billion to bring what it called 'a layer of resilience' in case of possible further losse after 2013.
Professor Honohan said there would be majority state ownership in all banks. Speaking about mortgages, he said he did not predict a lot of home repossessions but said the stress tests were predicting a worst case
He said he did not predict anything like the number of home repossessions that are predicted and calculated in the stress tests.
He said the Central Bank also has a role in consumer protection and would work with the banks to ensure there is better and more considered processes for working out distressed loans or mortgages.
Senior bond holders - adverse consequences warning
Professor Honohan said that there would be adverse consequences to dealing aggressively with senior bond holders. He said that it would be unwise to take such an action without the endorsement of Europe.
The Central Bank Governor said there is no question in the Government's plans about doing anything about the senior bond holders. He said the banks would have to move forward without doing anything about the senior bond holders.
The Central Bank said this evening the banking crisis has proven to be one of the costliest in history. Patrick Honohan said whilst he did have concerns about the new banking structures they were the best way forward.
Mr Honohan said the plan was the best way forward, but he said there were no good ways forward. He said that the measures outlined did 'not score highly on fairness'.
The head of financial regulation at the Central Bank, Matthew Elderfield, said banks needed to be upfront with customers and he said people should approach banks and agree a deal if they have loans which are in difficulty.