Ireland's banks are to receive a 10 billion-euro (£9bn) state bail-out, possibly funded by money from the national pension reserve fund.

The Irish government said it wants to ensure the long-term sustainability of lenders such as AIB, Anglo-Irish, Irish Life & Permanent and Bank of Ireland, which owns the Bristol & West bank.

The scheme mirrors a larger version carried out by the British government in recent months to help shore up several UK banks' balance sheets and boost their lending.

It is intended to help boost the flow of funds to the beleaguered economy and limit the impact of financial market turmoil on businesses and individuals.

Finance minister Brian Lenihan said the state was prepared to "deploy its wealth to secure the banking sector in the interests of the whole economy".

"Some financial institutions are so embedded in our economy in terms of their borrowing and in terms of their deposits that they are of systemic importance to our economy," he told RTE News.

"It's very important that our banking system is seen to sustain our economy and support our economy.

"If capital is required to demonstrate that confidence, capital will be provided, but on strict terms and on terms that will ensure a full return to the tax payer and to the pension fund. There will be no exposure to the tax payer on this."

Financial institutions, some of whose share prices have slumped markedly this year amid the global financial turmoil, are being asked to submit their proposals for the scheme by next month.

The Irish Business and Employers Confederation (Ibec) welcomed the recapitalisation announcement. Director general Turlough O'Sullivan said the banking sector was vital to business and the economy in general.

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