The Government attempted yesterday to minimise damage to the financial markets and the economy as a result of the €864 million suspected fraud at a US subsidiary of AIB.

The Taoiseach, Mr Ahern, said that AIB would still be profitable and that was what customers wanted to know.

The bank's 98,000 Irish account holders and shareholders would not suffer any loss of funds, he said in the Dáil.

He added that the bank's capital base and solvency remained strong, and "there's no danger to any AIB account holders of any loss of funds".

A Government spokesman said the question of State intervention was not being considered.

The Minister for Finance, Mr McCreevy, said the suspected fraud was damaging for the bank and the Irish economy. AIB and Elan, he said, made up nearly 40 per cent of the Irish stock market, and anything affecting either company had an impact.

However, he said there was no danger of the fraud damaging the overall stability of AIB, and that it was a totally different situation from the collapse of the Insurance Corporation of Ireland in the 1980s.

The Fine Gael enterprise, trade and empolyment spokesman, Mr Charles Flanagan, said the prospect of bailing out the bank was one which would have to be given consideration in a "doomsday situation".

"But we would be most reluctant having regard to profit levels in AIB. I don't envisage such a situation happening, although one would have to look at the fairly dire consequences in the event of such a thing happening."

Mr Flanagan also called yesterday on the Tánaiste, Ms Harney, to issue a full report on the impact of the fraud on Irish pension funds. "It appears extraordinary that lessons from the Barings collapse appear not to have been learned and management structures must be subjected to an early review," he said.

The Labour finance spokesman, Mr Derek McDowell, said in the Dáil that it appeared clear the "regulatory environment" was not up to the job.

The fact that a fraud of this kind apparently went undetected for up to one year was "an astonishing indictment, not just of the practices within AIB and its subsidiary but also of the regulatory authorities which failed to spot it".