UPDATE 1-Ireland rules out further bank takeovers; eyes Lisbon

* Vote on "bad bank" likely after Lisbon vote on Oct. 2

* Property valuations will be based on 35-year trend

* Govt will announce property valuations on Sept. 16

* Signals tax burden will not be raised significantly (Adds more detail, background)

By Carmel Crimmins

DUBLIN, Aug 23 (Reuters) - Ireland's Finance Minister ruled out fully nationalising either Allied Irish Banks (ALBK.I) or Bank of Ireland (BKIR.I) following the creation of a "bad bank" and said its setting up would not distract from a second vote on the Lisbon Treaty.

Dublin may end up with a majority stake in its top two lenders if it has to boost their capital levels following the transfer of property loans to the "bad bank", but Brian Lenihan said on Sunday 100 percent takeovers were not on the cards.

The government took over the country's No.3 lender Anglo Irish Bank in January after a slew of scandals triggered a run on its deposit base.

"We don't anticipate nationalising any other institutions in their entirety but if the losses in these institutions (Bank of Ireland and Allied Irish Banks) are on a very large scale then clearly a substantial state stake will have to be taken," Lenihnan said in an interview with state radio.

Lenihan faces a rough ride getting legislation to create thbe "bad bank" or National Asset Management Agency (NAMA) past parliament, where the government's technical majority has been wiped out by the recent defection of two deputies.

Earlier this week, the main opposition slammed his plan as a "90 billion euro gamble" and junior coalition party, the Greens, is facing pressure from its members to tweak the legislation to give greater protection to taxpayers.

Lenihan signalled that the government would hold off voting on the NAMA legislation until after a second referendum on the European Union's Lisbon Treaty on Oct.2.

Opinion polls show a majority of Irish voters now support the charter, which is designed to streamline decision-making in the 27-nation bloc, but the government, whose support levels are at record lows, cannot afford to be complacent.

"I don't want a divisive vote on the NAMA issue to interrupt the Lisbon debate," Lenihan said.

HISTORIC TREND

The government will use property valuations compiled by HSBC (HSBA.L) and others to help it decide what sort of discount it will demand on up to 90 billion euros of property loans and associated investments to be transferred to NAMA.

Lenihan said the valuers would look at Irish property prices over a 35-year period but would exclude a recent bubble, during which house prices quadrupled in the ten-year period to 2007.

"You are looking at the historic trend in Irish property values since 1974 but you are excluding the recent bubble because that clearly would inflate the trend," he said.

Lenihan said he would announce the valuation estimates, which he has yet to receive, when he introduces the NAMA legislation to parliament on Sept. 16.

Analysts at Dublin-based brokerages on average expect the government to demand a discount of around 17 percent and 20 percent respectively for the development loan books of Bank of Ireland and Allied Irish.

Whether or not that triggers a demand for state funds depends on a number of factors including the minimum capital cushion required, existing provisioning and the banks' own ability to raise funds.

AIB, which has a larger block of risky development loans, is seen as the most likely candidate for additional state capital but not necessarily a majority stake.

Lenihan, who will be unveiling another austerity budget in December, also signalled that the bulk of fiscal savings for next year would be on the expenditure side.

"The burden of taxation in this economy is high enough," he said.

(Editing by XXX)