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Market reaction to the Government’s €7 billion recapitalisation of the State’s two largest banks AIB and Bank of Ireland has been muted with shares in both lower this afternoon as some brokers question if the capital will be sufficient.

At 3.40pm shares in AIB were 7.5 per cent lower at 99 cent, having earlier fallen by 15 per cent. Bank of Ireland stock was 8 per cent lower at 56 cent.

Under the Government’s plan it will pump €3.5 billion into each bank and get warrants giving it an option to buy a 25 per cent stake in the lenders. Both banks have welcomed the decision.

Kevin McConnell, head of research at Bloxham Stockbrokers, said the capital injection is “good news insofar that there is a sizable capital injection”/

“However, without clarity on either an insurance scheme or the creation of a bad bank, there is still uncertainty over the size of the impact of bad debts on capital levels.”