The Government has announced its restructuring plan for Permanent TSB, which will be submitted to the EU before the end of June.
In a statement, Irish Life and Permanent said the plan will create a ''viable, customer focused and competitive retail bank capable of resuming normal lending into the Irish market''.
''This will be achieved by carving out a viable bank from the current Permanent TSB business'',' it added.
The Permanent TSB bank's loan book is expected to be worth €14.2 billion.
At the same time the group will create an asset management unit to manage those businesses and assets which are not core to the new bank.
IL&P said a wide range of assets and loans will be moved to this unit will allow the bank to ''manage them in a more concentrated and professional manner''.
It is expected the unit will have a loan book worth €12.5 billion.
The group's UK business will continue as a standalone business unit with a loan book of €7.1 billion.
"This decision follows the most intensive and detailed review ever undertaken of the options for Permanent TSB bank. No option was excluded from consideration including the outright closure of the bank," said the Chairman and CEO of Permanent TSB, Alan Cook and Jeremy Masding, in a joint statement.
''We believe that there is a compelling case that a viable, competitive bank can be created from the current Permanent TSB by separating out the different elements of that bank into distinct business units and that Permanent TSB itself is the most suitable vehicle for managing that process in the short to medium term," they added.
Finance Minister Michael Noonan said today that the restructuring of Permanent TSB will not cost the State any more capital.
Permanent TSB has confirmed that not all of the assets being moved to its new asset management unit', or 'bad bank', will be tracker mortgages. The bank said that some of these mortgages will be retained in the new retail operation.
Sources have also indicated that a "positive" decision regarding the high interest rate charged to variable rate mortgage holders could be on the cards following the restructuring deal reached with the troika today.
Permanent TSB's chief executive Jeremy Masding has said the deal will return PTSB to being a viable retail bank. He admitted at one stage they considered completely closing it down, but that keeping it operating in this new form would serve the tax payer best.
He also said there may be some job losses as a result of the changes, but no immediate announcements would be made.