Discussions between Ireland and officials from the EU and IMF are focusing on the possibility of banks selling loans of about €100 billion.
The money would be used to help pay back €145 billion which the banks have borrowed from the Central Bank and the ECB.
But experts warn there is a danger that if Ireland sells the loans quickly it would have to compensate investors who buy those portfolios of loans for potential losses. This cost could run to tens of billions of euro.
It is likely that the new Government will be presented with a menu of options in late March. If the sell-off of assets is agreed in the coming weeks, it would mean one-third of the loans in the Irish banking system would be purchased by investors. A key focus will be selling the foreign operations of Irish banks.
Selling loans will shrink the size of the banks significantly, but experts warn it could have ramifications for the number of employees needed by banks here.
There is a team of officials from the IMF, European Commission and European Central Bank meeting the authorities in Ireland this week. Irish officials have been arguing against a rapid sale of assets. It is understood the pressure for a quick sale from the EU and IMF has eased in recent weeks.
The loans which would be sold would include mortgages and business loans. The Central Bank has hired Blackrock Solutions, Barclays Capital and Boston Consulting Group to examine the restructuring of the banks.
This afternoon, the European Commissioner for Economic and Monetary Affairs confirmed he wanted to see the restructuring of the Irish banks to proceed along the lines outlined in the memorandum of understanding between the Irish Government and the EU and IMF.
The Central Bank is also due to publish a review of the capital and liquidity requirements of the banks at the end of March. In a statement the Central Bank said: 'IMF/EC/ECB teams are visiting the Central Bank regularly to discuss elements of the programme. During this mission, the Central Bank will provide an update on financial conditions and the progress of the financial measures programme, including the prudential capital assessment and prudential liquidity assessment reviews which are due to be completed by March 31 and are progressing according to schedule.'
