AIB has said it will need to raise an additional €1.5bn in addition to the €3.5bn being provided by the State.

In a statement, Minister for Finance Brian Lenihan says he welcomes the move and adds that work on the National Asset Management Agency will begin as a matter of priority over the coming weeks.

AIB has two profitable businesses it could sell to raise funds.

It owns a 22% stake in US bank M&T, which is worth about €660m, and an extensive operation in Poland.

The Department of Finance said a similar stress test of Bank of Ireland's books did not indicate a need for further funds.

Minister Lenihan again ruled out nationalising both banks.

However, this morning he stressed further injections of capital would increase State ownership.

Analysts expect the Government will end up owning a majority of the bank.