Shrinking the banking sector into two so-called pillar banks will leave customers crucified by a drive for profits, it has been claimed.
As officials open the state's books and explain the new bank plans to inspectors from the International Monetary Fund (IMF) and Europe, Independent TD Shane Ross warned the Government risked a banking duopoly.
The Government is about to pump another 24 billion euro into the failing banks to keep them afloat and plans to shrink the sector from six home-grown lenders to two so-called pillar banks.
But Mr Ross warned Taoiseach Enda Kenny: "By retreating into that position, you're inviting them to regain the territorial strength that they had in the past and be able once again to crucify the consumer in order to gain increased bank profits.
A delegation from the IMF, the European Central Bank and the European Commission has returned to Ireland for a 10 day review inspecting the state's books.
Mr Ross said the Government had surrendered to the IMF and EU after the Government did not force senior bondholders - lenders first in the queue to be repaid - to take a hit on bank losses.
He questioned why major European bank lenders were treated in the same way as ordinary deposit holders and drew Mr Kenny's attention to a Financial Times article highlighting the issue.
But Mr Kenny said his Government had brought clarity and certainty to the sector by reducing the number of banks.
"Unfortunately because of the constraints placed on the people here, because of the IMF/EU deal, the options that a new government would like to take were quite limited," Mr Kenny said.
"But you must make decisions, and we made the decision, as a Government, to bring about certainty and clarity to the banking sector."