It is understood the Government will end up with a shareholding of around 35% in Bank of Ireland.
It is also expected that the bank will raise €3.4 billion of new capital. Bank of Ireland directors are expected to meet over the weekend to finalise details of the programme.
It is likely that a rights issue will raise around €1 billion, while converting Government preference shares into ordinary equity will raise between €1.5 billion and €1.7 billion. The outstanding money will be raised by a share placing and a debt-for-equity swap.
But the final figures will depend on the reaction from institutional investors, which has so far been positive to presentations from senior Bank of Ireland.
This morning, the bank confirmed that it had started talks with a number of potential institutional investors with a view to assessing the interest in raising capital.
In this morning's statement, the bank said that it expected that the State would continue to be a minority shareholder in the bank.
Bank of Ireland needs to raise €2.7 billion of capital to satisfy new regulatory requirements and compensate for writedowns on discounted loans it transfers to NAMA.
Bank of Ireland CEO's pension move welcomed
The decision by Bank of Ireland chief executive Ritchie Boucher to waive his €1.5m pension fund top-up has been welcomed.
Mr Boucher made the announcement last night after the entitlement became public and erupted into political controversy.
In a statement last night, Bank of Ireland chief executive Ritchie Boucher said he was sensitive to public debate on the issue of his pension fund top-up and so would waive his right to it.
A spokesperson for the Taoiseach said this statement reflected earlier comments from Brian Cowen about the controversial pension entitlement.
Mr Boucher's contract had allowed him retire at age 55 on a weekly pension of some €6,500.
The fact that the chief executive will not now need to exercise that entitlement means the bank's pension fund does not need the controversial top-up.
Opposition leaders had attacked the proposal and Labour Relations Commission CEO Kieran Mulvey suggested the ongoing controversy was hampering efforts to sell the proposed public sector pay deal.
Fine Gael leader Enda Kenny said that it was the depth of public anger and political pressure which had resulted in the pension U-turn.
In his statement last night, Mr Boucher said that although he has been out of the country this week engaged in intensive work in rebuilding the banking group, he said he was sensitive to the comment and debate about his pension arrangements.
'My absolute priority and that of all my colleagues in Bank of Ireland is to complete the task we have set ourselves to restore the strength of the business and support economic recovery,' he said.
'In this regard I am determined that none of us in Bank of Ireland should be distracted from this critically important task. Therefore, I have decided to waive my option to retire on pension at age 55,' he added in his statement.
Bank of Ireland shares closed down just one cent at €1.81 in Dublin.
