IRISH Life & Permanent suspended trading in its shares this morning after the price went into freefall.
Traders were rapidly dumping their shares yesterday after reports that the banking group could end up in majority State control by the end of the week.
The share price of the only Irish bank tumbled by 45pc in just one day.
Bank stress tests are expected to reveal that IL&P will need between €2bn and €3bn in capital to cover higher mortgage losses at the bank section of the group, Permanent TSB.Stress
The board of the bank moved this morning to put trading in the bank's shares on hold in Dublin and London until Friday.
The group is barred from commenting on the results of the stress tests until they are officially released tomorrow.
But the company said it had noted the speculation about the potential need for more capital as a result of bank stress tests.
The tests "are not completed and the quantum of capital that may be required by the group, and the source of that capital, is not yet finalised", it said.
Economists have moved to assure IL&P customers with deposits and policy and pension holders that the move will not have any significant impact on their own business.
"Nothing has changed in terms of the operation of the company," said Jim Power, chief economist at Friends First.
"The shares have now been suspended, the recapitalisation figure announced tomorrow and business will go on. Mr Power said that the capital injection due to be announced tomorrow would secure deposits and policies at the banking group.
"Of all of the institutions that the government is being forced to take control of, Irish Life is one of the better ones," he said. "Ultimately the State wouldn't want to own it but it will own it.
"Eventually they will try and sell it back into the market and there would be significant overseas interest in buying it."
The Department of Finance said that it would make no comment ahead of the publication of the stress tests tomorrow but moved to assure policy holders that they would not be affected by the move.
The bank, which is already 36pc owned by the State, will come under increasing pressure to cede majority control to the Government following the results of the stress tests.
The bank has already had to raise €1.4bn under the previous capital bill.Bailout
Irish Life & Permanent along with Bank of Ireland, Allied Irish Banks and building society EBS, are all being stress-tested by the Central Bank to see how much more of the €35bn EU-IMF bank bailout fund is required in addition to the €10bn already allocated for the banks.
Asset management company BlackRock is believed to be considering losses amounting to about 12pc of the mortgage books -- more than double the level of losses estimated in last year's capital stress firstname.lastname@example.org