Irish banks tumbled on speculation that the toxic loans they are planning to sell to Ireland's so-called "bad bank" would be valued at a lower price than initially expected.
The lenders are trying to clean up their books by removing their most toxic real estate loans and selling them to the government-backed bad bank, a move expected to increase confidence in the country's financial institutions.
But Allied Irish Bank plunged 20% to €1.35, and Bank of Ireland lost 14% to €1.19 by mid-morning in Dublin.
Last week, Anglo Irish Bank said the government might need to triple its investment to €13bn (£11.7bn) to keep the nationalised lender afloat, another sign about the fragile state of the Irish economy.
Gary Jenkins, a credit analyst at Evolution Securities, said: "Speculation has indicated that the haircut taken on the first tranche of loans could be far higher than the initial 30% estimate made last September, with press reports suggesting they could go as high as 50% for both Anglo Irish Bank and Irish Nationwide, and between 35-40% for Bank of Ireland."
