The government’s move was announced by Brian Lenihan, the finance minister. The government said the bank would “continue to trade normally as a going concern”. The action was taken after the government decided that a €1.5 billion ($1.9 billion) recapitalisation scheme was no longer the best way to protect the bank’s future.

"Anglo Irish Bank is a major financial institution whose viability is of systemic importance to Ireland. Anglo has a balance sheet of some €100 billion with a substantial deposit base which the state is determined to safeguard. The government has made clear that it will ensure its continued viability. Anglo Irish Bank will continue to trade normally as a going concern, with appropriate government support as necessary. All Anglo employees remain employed by the company,” the Irish finance ministry said in a statement.

The bank, which has been heavily exposed to the country’s battered property sector, has been hit by controversy surrounding actions of senior executives in recent weeks. Sean FitzPatrick stepped down as chairman just before Christmas – along with chief executive David Drumm – after revelations that the bank failed to disclose €87 million of personal loans to the chairman over an eight-year period.

In its statement, the Irish finance ministry continued: “The funding position of the bank has weakened and unacceptable practices that took place within it have caused serious reputational damage to the bank at a time when overall market sentiment towards it was negative. Accordingly the government believes that the recapitalisation is not now the appropriate and effective means to secure its continued viability. Therefore the government must move to the final and decisive step of public ownership.”

The bank’s shares are set to be suspended today on the Dublin and London stock exchanges. The government will introduce legislation in parliament on Tuesday to put the nationalisation into effect.