UPDATE 1-Irish regulator says examining bank loan books

(Adds finance minister comment, deputies approve bank scheme)

By Jonathan Saul

DUBLIN, Oct 17 (Reuters) - Ireland's financial regulator is examining the loan books of six Irish institutions that are expected to sign up to the government's guarantee plan, a spokeswoman said on Friday.

The spokeswoman said the audit, conducted by PricewaterhouseCoopers (PwC) on behalf of the regulator, was launched before the state scheme was announced on September 30 and could be completed later this month.

"We are drilling down into the figures to get detailed, comprehensive analysis of the individual loans," the spokeswoman said without giving further details.

The Irish plan initially guaranteed 400 billion euros ($546.4 billion) in liabilities of six Irish-owned institutions, but the European Commission earlier this week approved a revised 485 billion euro guarantee scheme that includes foreign-owned banks with significant operations in the country.

Banks will need to formally sign up to the scheme, which was approved by a majority of deputies on Friday in a vote.

"We assume that PwC's brief is to look at how vulnerable the six banks' loan books are to the deteriorating economic conditions," broker NCB said.

"It also seems a big focus will be on assessing how many loans to the property and construction industry are not generating any cash flow for the banks."

The end of Ireland's property boom had already battered Irish bank shares before global financial turmoil compounded falls.

"We suspect the findings of PwC will confirm the fact that the banks will almost certainly require additional capital and that, in parallel to their UK neighbours, will need government help to support it," NCB said in a research note.

The six institutions are Allied Irish Banks (ALBK.I), Bank of Ireland (BKIR.I), Anglo Irish Bank ANGL.I, Irish Life and Permanent (IPM.I), Irish Nationwide Building Society and the Educational Building Society.

The government has not ruled out taking equity stakes in Irish banks but has said it had no immediate plans to do so.

"The preferred policy of the state in relation to the banking sector in the first instance is that the banks should themselves raise the necessary capital," Finance Minister Brian Lenihan told deputies on Friday during a debate.

Lenihan announced details of the plan on Wednesday which will see institutions paying a total amount of 1 billion euros over a two-year period to get cover.

"If the cost to the exchequer were to exceed 1 billion, the charge to the covered institutions will be adjusted accordingly," he said on Friday.