Bank of Ireland is planning to raise five-year Government-guaranteed debt, making it the second financial institution to tap the bond markets using the extended State bank guarantee scheme.

A bank spokeswoman said it was taking expressions of interest from potential investors in the State-backed five-year euro bond.

Market sources said the bank was expected to borrow between €1 billion and €2 billion on the bond and that it was likely to be priced at about 1.5 per cent above the midswaps rate, the European reference point for pricing debt.

Financial institutions can borrow debt for durations of up to five years under the extended bank guarantee, which was passed into legislation in early December.