The banking industry's representative association, Banking and Payments Federation Ireland, has published a report claiming Irish banks are forced to hold three times the amount of capital as its European counterparts.
The federation (BPFI) says this is adding to the cost of lending and mortgages here.
When a bank makes a loan or sells a mortgage to a customer, it must retain certain levels of reserves in case the loans are not paid back. These are set by regulators like the Central Bank.
In a major study of over 600,000 mortgages across the five main Irish banks, BPFI says the level of capital reserves its members must keep are "trapped at levels of the financial crisis".
The study says Irish banks hold almost three times the average eurozone capital amounts and over three times the amounts held in French and Spanish banks.
It says stricter mortgage lending rules brought in five years ago have had little or no impact on lowering the amounts banks must set aside.
It blames the low rates of recovery on problem loans through the judicial process here compared to Europe.
Ireland has the second highest mortgage rates in Europe, next to Greece.