Irish bank shares fell sharply today due to concerns about the potential requirements the European Union may impose in return for Government bailouts.
Shares in Bank of Ireland lost a quarter of their value today, falling to €1.65, the stock's lowest level since mid-July, with 2.4 million shares traded.
AIB also suffered sharp falls, dropping 11.9 per cent to €1.85, its lowest level since early August. Irish Life & Permanent stock closed 10.6 per cent lower at €4.80.
The share price falls in the financials contributed to Dublin’s Iseq closing down 6.5 per cent at 2,859.
Bank stocks across Europe have fallen this week after Dutch financial-services company ING Groep agreed to EU demands that it sell its insurance units to secure approval for its bailout.
European shares hit a three-week closing low this afternoon, hurt by disappointing earnings from Spain's Banco Santander and Germany's SAP and on data showing US new home sales unexpectedly fell in September.
"People have put a bit more money back into the defensives, the cheaper end of the market," said Philip Lawlor, chief portfolio strategist at Nomura, in London.
"There isn't going to be any double-dip. The market just got a bit ahead of itself. Valuations went from looking relatively cheap to looking relatively expensive."
Bank of Ireland and Allied Irish have received €7 billion from the Government, which is now in the process of establishing National Asset Management Agency (Nama).
"The scale of the requirements placed on ING seems to have taken the markets by surprise, which has impacted sentiment towards other banks," said Anna Lalor, an analyst at Goodbody Stockbrokers in Dublin.
Bank of Ireland filed a restructuring plan with the European Commission in September, while Allied Irish is scheduled to submit its plan next month.
While investors' concerns for Irish banks stem from EU approval for Nama's valuation methodology for assets, Ms Lalor said the Government has consulted with the EU and it would be "surprising if the process had got this far" without "some indication to the Irish authorities that the EC is generally in support of the model.
Additional reporting Reuters