The Government has announced plans to take complete control of Anglo Irish Bank, saying its previous plan to inject money into the bank is not the best way to secure its viability.
Anglo Irish Bank's chief executive David Drumm and chairman Sean FitzPatrick resigned last month in a controversy over secret loans to directors. Its finance director and chief risk officer Willie McAteer resigned last week.
The Government had planned to inject €1.5bn into the bank, taking 75% of the voting rights in the process.
Since reaching a peak above €17 in mid-2007, shares in Anglo Irish have plummeted, and closed at just 22c in Dublin today.
A statement tonight said the bank would continue to trade normally and all its employees would stay with the company.
The Government said 'unacceptable practices' within the bank had caused it serious damage.
Finance Minister Brian Lenihan said: 'I would again stress that this Government decision safeguards the interest of the depositors of Anglo, and the stability of the economy, given the significance of Anglo in this regard, as already recognised by the European Commission.
'The bank will continue to operate as normal and depositors and creditors should continue to transact as normal.'
The Government has prepared legislation to give effect to the nationalisation, which will be presented to the Oireachtas on Tuesday.
Trading in the shares is expected to be suspended before the Irish stock market opens tomorrow.
The Government statement said shareholders' rights would be respected, and the legislation will outline plans for compensation.
A spokesman for the Taoiseach, who is in Japan on a trade mission, said Mr Cowen had been closely involved in the decision making process over Anglo Irish Bank.
It is understood that he was in touch with senior officials in his own department and with the Minister for Finance Brian Lenihan between his engagements, which included a meeting with the Japanese prime minister.
Questioned by journalists yesterday about the bank and Fine Gael's decision to resist recapitalisation Mr Cowen repeatedly referred to Anglo as a systemic bank within the Irish system.
Banking policy in ruins - Opposition
Meanwhile, Opposition parties have claimed the Government's banking policy is in ruins after tonight's announcement on Anglo-Irish Bank.
Fine Gael's Richard Bruton said the decision was correct.
However he went on to say it was the latest in a long line of U-turns.
Deputy Bruton said Fine Gael had opposed recapitalisation when it was announced, because of the lack of trust and confidence in Anglo.
He said the handling of the issue confirmed once again that the Government are ‘all at sea on economic policy and are lurching from one u-turn to the next’.
Labour's Joan Burton said the Government had gone to ‘extraordinary lengths’ to avoid nationalising the bank and that enormous damage had been done to Ireland's reputation in international markets.
She said an unknown quantity of bad debt, running to billions of Euro, has been taken on by the Exchequer, with the potential to further increase the cost of Irish Government borrowing.
Deputy Burton said the sheer incompetence was breathtaking, and the damage to the Exchequer unknown.