The full capital impact of Ireland's "bad bank" on Allied Irish Banks and Bank of Ireland will not be known until next year, a source familiar with the set-up of the new agency said on Wednesday.

Dublin is creating a National Asset Management Agency (NAMA) to take over the property and development loans of Irish banks, whose lending binge brought them to the brink of collapse and buried the reputation of the "Celtic Tiger" economy.

NAMA will take over loans and associated colleratal with a nominal value of 80 billion euros ($113 billion), said the source, who declined to be identified because legislation creating the agency has yet to be published.

At such a level, the new vehicle would hold more assets than any listed property firm in the world, dwarfing heavyweights GE Capital Real Estate and Morgan Stanley Real Estate, which own and manage assets of $85 billion and $70.4 billion respectively.

NAMA will take over the assets at what Finance Minister Brian Lenihan said in April would be "a significant discount".

Concern that a large writedown would trigger the need for further capital injections from the government has steered institutional investors away from buying shares in Allied Irish and Bank of Ireland.

The source said the assets of the top 50 developers, with a book value of around 30 billion euros, would be transferred to NAMA by the end of this year and the remainder would likely be transferred by the middle of next year.

Only when all the assets are transferred can it be determined whether Allied Irish Banks and Bank of Ireland need further capital infusions.

"The difficulty is you can't determine what a global haircut is going to be for any institution because you have to value the individual assets," said the source.

"By mid 2010 when NAMA completes the final transfers it will become clear whether the institutions need more capital or not."

CHAMPAGNE AND HELICOPTERS

Lenihan said in April that the assets, some of which are still performing and are held by building societies, nationalised lender Anglo Irish Bank as well as the two listed players, would have a book value of 80-90 billion euros.

But the source said NAMA will likely only accept loans with a nominal value over 5 million euros each on the books of Allied Irish and Bank of Ireland, cutting the portfolio's nominal value to around 80 billion euros and the number of borrowers it has to deal with to 1,500 from around 14,000.

Banks in Ireland feted property developers during the height of the boom, giving them large loans on generous terms which helped fuel their champagne and helicopters lifestyles.

Anglo Irish Bank, which was nationalised in January, was particularly exposed to the fortunes of developers after lending around 15 of them over 500 million euros each.

The source said it was estimated that Ireland's top 100 borrowers represent around half of the 80 billion euros.

Legislation creating NAMA will likely be published later this month and the source said it would likely give the government the ability to take over other classes of soured bank debt and not just commercial property loans.

The International Monetary Fund has said NAMA's responsibilities should be extended to other asset classes but the source said while the law may provide for such a possibility it was unlikely to be used.

"The proposed legislation may provide that the minister can extend the range of assets being eligible to transfer to NAMA but in reality there is a strong probability that it will not need to be activated."

The banks will have the right to appeal the methodology used to value their assets but only when all of the assets of a particular institution are transferred over.

"The outcome of that appeal will be determined when an institution's entire portfolio transfers across to NAMA. It will not stop the assets moving across to NAMA in the interim."