Allied Irish Banks (AIB) has been deemed to be effectively in default on its debts.
The International Swap and Derivatives Association judged AIB's decision to stop interest payments on a number of its bonds - as well as a postponement on repayment dates - to be a form of debt restructuring.
It means cash payouts will now have to be made by the writers of credit default swaps (CDS), which are insurance-like contracts that amount to around $500 million - while 90 per cent losses will be felt by affected bond investors.
AIB, meanwhile, will save around €2 billion ($2.89 billion) through the move.
One London-based credit trader told the Daily Telegraph: "There could be a big wake-up call here for investors. People still do not understand that a CDS credit event and default are two completely separate things."
Debt concerns have also been raised at another major Irish institution of late, with Cathal O'Leary, head of fixed-income sales at NCB Stockbrokers in Dublin telling Bloomberg that the Bank of Ireland is suffering considerable arrears troubles.
By Claire Archer