Rescue plan for Ireland's banks

The state will be able to select a quarter of the boards in both banks

The Irish government has announced revised plans to rescue two of the country's biggest banks.

The Allied Irish Bank and the Bank of Ireland will each receive 3.5bn euros ($4.5bn, �3.1bn).

Finance Minister Brian Lenihan said the government would not take control but the banks would be expected to increase lending and cut senior executives' pay.

Many Britons use Bank of Ireland financial services offered through the UK's network of 16,000 Post Offices.

Mr Lenihan said rescue packages would guarantee the banks' positions "in view of the continuing turmoil in global financial markets".

Under the deal, both banks will also have to suspend home repossessions.

'Aiding economic recovery'

"The state will not hold ordinary shares in either bank... but it will have an option to buy shares in five years time at a predetermined strike price, thus providing the state with the potential for a significant return," Mr Lenihan said.

The government will also be able to select a quarter of the boards in both banks.

Bank of Ireland said: "The package of measures will enable Bank of Ireland to play a full role in supporting our customers and aiding economic recovery."

In January, the Irish government said it planned to keep Allied Irish Banks and Bank of Ireland private.

The announcement was made after the government nationalised Anglo Irish Bank last week over concerns it could collapse.