MINISTER FOR Finance Brian Lenihan has said the bank guarantee scheme was "a necessary first step" and "the cheapest bailout in the world so far".

Mr Lenihan said the guarantee was "the cheapest bailout" compared with bank rescues in other countries, including the UK and the US, where "billions and billions of taxpayers' money are being poured into financial institutions".

The Minister said the guarantee had successfully attracted a lot of liquidity into the banking system.

"It allows us to move on and examine other questions which may have to be addressed to ensure that the banks are put on a sound footing and will guarantee to the wider economy the necessary lifeblood that the system requires," he said at a Leinster Society of Chartered Accountants lunch in Dublin.

Speaking before the lunch, Mr Lenihan repeated that he wanted the banks to raise any additional capital needed to protect against unforeseen losses by private means in the first instance.

He said the banks' capital needs were being reviewed.

"We are making the arrangements for the appointment of new directors who will pursue the public interest in the banking sector. The regulator is recruiting staff who will help them at credit and audit committees at the banks and the financial institutions," he said. "When all of that is constructed, we are in a much better situation to know what is happening in the banks. That work is happening this week."

The six Irish-owned banks covered under the guarantee are expected to submit their competed "guarantee acceptance deeds" to the Department of Finance later today confirming their participation in the scheme.

Irish Life Permanent fell 12.6 per cent to €3.10 after the company said it had an exposure to debt issued by Icelandic banks.

AIB rose 3.8 per cent to €3.52, while Bank of Ireland fell 3 per cent to €1.60. Anglo Irish Bank remained unchanged at €1.80.

The Department of Finance said in a market notice issued on its website on Wednesday that a financial institution covered under the guarantee was "not required to indemnify" the State in a guarantee given to any other covered lender that is not part of its group.

This will assuage concerns among banks that they would be forced - under the terms of the guarantee scheme - to cover the cost to the State of any other guaranteed lender defaulting on its debt.

The rules of the scheme had said the Minister could recoup any losses incurred on one covered institution from all of the institutions guaranteed in the scheme.

Mr Lenihan said in his speech yesterday that Ireland had to go it alone by protecting its banks.

"We are on our own in the sense that we have to ensure that our banking system is reformed and restored to the position where it can provide the necessary credit that is essential for the successful operation of Irish businesses."

Mr Lenihan said the guarantee scheme had attracted criticism from major European countries.

He added that the Lisbon No vote had "done us huge damage among our European friends".

"Look at what happened in Iceland - if we have no viable banking system in this country or we allow the banking system to fail, we won't have an economy," he said.

"The disastrous implications of bank failures - we have seen them in every country in the world.

"Our Government has a duty to give leadership on this issue and to ensure that we retain that viability in this country."

Ireland may issue about €3 billion of debt before the end of 2008, according to the National Treasury Management Agency.

The Treasury may issue more than €18 billion next year, higher than the €11 billion to €12 billion it had originally assumed, a spokesman for the agency said.

The sales may include a 15-year bond.