THE DEPARTMENT of Finance has disputed a claim by the Financial Timesthat it was trying to bring the State's most distressed bank, Anglo Irish Bank, "Lazarus-like", back to life – as asserted in an editorial earlier this week.

The newspaper claimed the Government was “prolonging the uncertainty in the hope that zombie banks will, Lazarus-like, come back to life”.

It argued the Government’s plan to split Anglo into a funding bank and an asset recovery bank didn’t clarify the final cost of the bank to the State and “continues to make citizens protect bondholders from their own folly”.

The newspaper called on the Government to allow “staggering bank losses” to fall where they should, “on unsecured creditors once shareholders are wiped out”.

In a replying letter published yesterday, the department’s press officer said the newspaper’s views were “not in accordance with the facts” and that Anglo’s loan book would be “worked out over time in an asset-recovery bank”.

The department also disputed a figure of €776 billion cited by the newspaper as the size of the domestic banking balance sheet, saying the figure was €523 billion at the end of June.

Minister for Finance Brian Lenihan has ruled out any possibility of Ireland defaulting on senior bondholders but said Anglo may buy back more subordinated debt – money borrowed for a risk premium – under the Anglo plan.

The bank has said it has sought approval from Irish authorities to buy back subordinated debt from bond investors.

The Government will outline the cost of its plan for Anglo next month once the Financial Regulator weighs the capital needs of the two banks under the plan. The current estimate of the cost of Anglo stands at €25 billion, though credit ratings agency Standard and Poor’s says it could be as high as €35 billion.