A report by Merrion Stockbrokers estimated tracker portfolios – which account for almost two-thirds of all Irish mortgages at AIB, Bank of Ireland and Permanent TSB – generated losses of around €708m (£604m) last year, the Irish Times reported.

Analyst Ciaran Callaghan wrote:

“In order to avoid an off-balance sheet transfer which is likely to be capital destructive, the optimal solution in our view would be for the banks to internally ring-fence these portfolios in non-core units, while obtaining a cheap dedicated credit line to fund the assets.

“While such a structure would clearly be beneficial from the banks’ perspective, we are not as confident that the European Stability Mechanism and/or the European Central Bank will be as willing, or legally capable, in assisting with such proposal in the near-term.”

Ireland is currently in talks with its lenders at the International Monetary Fund and the European Union on shifting the tracker mortgages out of the banks’ main balance sheets.

Other, more controversial suggestions for how to deal with the tracker mortgages held by the bailed-out banks have included taxing the tracker mortgage borrowers.

In the UK, the Bank of Ireland’s decision to raise rates on certain tracker mortgages has sparked criticism and triggered a class action by affected borrowers.