THE IRISH Congress of Trade Unions (Ictu) has called on the Government to nationalise the main domestically owned banks.

Ictu economic adviser Paul Sweeney said the Government should preferably borrow the cash required to pay for this investment rather then using the National Pension Reserve Fund. Ictu and trade unions in the banking sector said they were opposed to banks being bailed out or "seized" by venture capitalists or private equity funds.

Ictu said if "vulture capitalists" were allow to take shares in the Irish banks the taxpayer would lose, Wall Street would gain and there would be massive job losses.

The trade unions Unite and the Irish Bank Officials' Association (IBOA), representing about 40,000 bank staff, warned there would be industrial relations conflict if they were taken over by venture capitalists or private equity funds.

The unions gave a "cautious welcome" to reports that the investment subsidiaries of AIB, Irish Life Permanent and Bank of Ireland and a number of other Irish and international institutions were developing a plan to recapitalise the domestic banking system as co-investors with the State.

Mr Sweeney said Ictu was concerned that the banks would be bailed out by venture capitalists who would become involved for the short term and who would expect to make returns of 60-70 per cent over a couple of years.

He said the main banks were undervalued and that on Monday, the total market capitalisation of AIB, Bank of Ireland, Anglo and Irish Life Permanent was only €4.31 billion. He said the net profits recorded by these banks last year was almost €6 billion.

In a policy statement, Ictu said it was unacceptable that taxpayers should incur all of the risks of the bank guarantee scheme, while all the gains went to foreign venture capitalists who took little risk.

"If the Government borrowed the money to invest in the banks, it could do so at four per cent interest and lend it on at 12 per cent, making a handsome profit for the taxpayer on shares. If the Government took ordinary shares it could - but not necessarily - eschew interest but would share in the upside when the banks' shares recover," it said. Unite national officer Jerry Shanahan said his union had to rule out private equity as it was being presented. He said when private equity funds spoke of long-term investment, they meant 10 years at most.

He said the private equity funds were advertising returns of 20-40 per cent to their investors within two years, and that this would involve excessive profit taking. Mr Shanahan said Unite would forcibly resist attempts by venture capitalists to involve themselves in the banking system at the expense of the job security and terms and conditions of the staff.

General secretary of the IBOA Larry Broderick said there would be an industrial relations debacle if venture capitalists were brought on board. He called for a debate between Government and bank executives, "where we can sit around as partners".