The Government is expected to move to sell off the ICC and ACC banks in the first half of next year and is likely to seek tender offers for both. The ICC is understood to have received a significant number of serious expressions of interest from both Irish and overseas banks, while ACC is a likely target for a strong foreign banking group.

The trade unions representing employees in both of the banks have been informed recently of developments and further consultations are expected to take place next month, according to sources. These followed the forwarding by both of the banks of documents outlining their preferred future strategy. A key factor for both is that a a strong parent or strategic partner would provide badly needed access to capital to allow them to develop their businesses.

The ICC is understood to have received a number of approaches from both Irish institutions and a few overseas players interested in entering the Irish market. While the identity of those interested in the ICC is not known, the list is almost certain to include the Irish Permanent, which has little existing presence in the business banking market.

The National Irish Bank's parent, National Australia, is also likely to have examined the ICC, as well as some groups from Britain and Continental Europe.

ACC, meanwhile, has had discussions in the past with the French bank, Credit Agricole and is also likely to have had contacts with a number of other overseas players.

For the Government, the cash from the sale of the two banks is not urgently required, given the health of the exchequer finances. However, the Government will not be keen to continue to inject capital to allow the ICC and the ACC to expand their customer base.

Introducing a new partner - or selling the two banks - would provide a fresh source of capital.

The Cabinet decided before Christmas that, in principal, it was prepared to sell up to 100 per cent of its shares in both institutions. Along with the bank's management boards it must now decide whether to sell all the shares, or introduce strategic partners.

One route which is likely to be examined is the initial sale of a substantial stake in one or both of the banks, with the new partner having an option to move to a 100 per cent holding after a period of years. Another key issue will be how much of the funds raised from sale shares will go back to the exchequer and how much will benefit the banks' own balance sheets.

Both banks have said that they require new capital to continue to boost their businesses. ACC needs such extra capital to continue to develop as a player in the general consumer banking market. Meanwhile, ICC has seen strong demand for loans from small and medium sized businesses which are its core customer base.

In October the Government injected £10 million into the ICC, in a move which allowed the bank to expand its lending and venture capital investments by up to £150 million.