The Republic’s two leading banks could still be nationalised because they are unlikely to be in a position to start lending to business for up to a decade, according to one of the world's top investment banks.

The fate of Allied Irish Banks (AIB) - which operates in Northern Ireland as First Trust - and Bank of Ireland now lies in the hands of the European Central Bank (ECB) because the high street banks have borrowed so much from the ECB over the last few years, analysts from RBC Capital Markets said in a detailed research note yesterday.

The 140-year-old Canadian investment bank, consistently ranked among the top 15 global investment banks, dismissed the Irish banks as being in a “vegetative state” and facing a “debt wall of worry”.

The banks are likely to use money from the National Asset Management Agency (NAMA) to pay back the ECB and will not be in a position to lend to businesses from between nine and 14 years, they added.

“The NAMA proposal alone is insufficient to address the business model challenges facing the bank,” the analysts wrote. “Nationalisation could keep the ECB in the game and allow more liquidity to remain in Ireland.”

The Republic’s Government already owns 25% of Bank of Ireland and 25% of AIB in preference shares.