Irish govt set to invest billions in banks - paper

DUBLIN Dec 14 (Reuters) - The Irish government is preparing to commit billions of euros in cash to help recapitalise the banking sector, the Sunday Business Post newspaper said.

The finance ministry declined to comment on the report.

Separately, the Sunday Times said management at Anglo Irish Bank ANGL.I was trying to head off a possible nationalisation of the group after its share price plummeted to as low as 31 euro cents on Friday.

Anglo Irish Bank declined to comment on the report.

Ireland was one of the first countries to respond to the credit crisis with a two-year guarantee for bank liabilities worth some 440 billion euros ($583.7 billion), but it has not bailed out or nationalised any banks, and they have not raised equity themselves.

Six Irish institutions signed up for the scheme including the country's four listed banks.

The Sunday Business Post, without citing sources, said officials from the finance ministry and the National Treasury Management Agency, the state's borrowing arm, were discussing how much the main banks may require. The newspaper added that recapitalisation plans may still not be finalised.

Finance Minister Brian Lenihan said last month that any state involvement in the banks would be considered on a case-by-case basis and that the government had not proposed consolidation in the sector.

Irish media reports on Sunday said that Anglo Irish Bank had proposed raising capital through a new share issue and had asked the government to underwrite it and buy any outstanding shares that investors did not take up.

The Sunday Times said the government had refused the request, while the Sunday Business Post said the state had made no final decision although it had reservations with the proposal.

Investor sentiment towards Anglo Irish Bank has continued to sour over its exposure to a struggling commercial property market.

Brokers have said the bank will not meet its loan loss forecasts and could find it tough to raise additional capital.

Anglo Irish Bank said this month its full-year earnings had fallen 34 percent after a large provision against bad loans but added that shareholders supported a potential move to raise extra capital.

The Sunday Business Post said France's BNP Paribas (BNPP.PA) was being sounded out about participating in an Irish banking industry consolidation, with the EBS building society a possible target.

BNP Paribas was not immediately available for comment. EBS declined to comment. ($1=.7537 euros) (Reporting by Jonathan Saul; Editing by Greg Mahlich)