Bank of Ireland on Tuesday became the second top Irish bank to suspend interest payments on some bonds and share dividends pending an EU verdict on its state bailout, signalling it could buy back more of its debt. Allied Irish Banks, which like Bank of Ireland has received 3.5 billion euros ($5.0 billion) from the government for a 25 percent indirect stake via preference shares, announced similar action last month.

Analysts said it could have the unintended consequence of forcing Dublin to raise its stake in the banks. EU competition authorities have stopped banks, including Royal Bank of Scotland, from paying dividends on some securities as a condition of the state aid they have received.

The Irish suspensions could lead Dublin to take control of more of the two leading banks as the halting of coupons on some bonds triggers a "dividend stopper" on other cash payouts and forces the bank to make an interest payment in shares.

Copyright Reuters, 2010