House prices in Ireland have fallen by 24 per cent in the past two years and the worst property slump in Europe has meant ever-growing losses for the banks' investments.
The RBS-owned Ulster Bank posted a near $800 million loss for the first half of 2009 and announced it was to cut 1,000 jobs.
Both Lloyds and RBS are partly owned by UK taxpayers after chancellor Alastair Darling bailed them out of their financial difficulties with $59 billion in 2008.
But UK Financial Investments, the government agency in charge of managing the state's bank shareholdings, said it would not interfere with either bank's dealings.
A spokesman told Bloomberg: "As an engaged shareholder, our priority is to protect and create value for the taxpayer.
"We will not intervene in operational management decisions of the banks."
By Tony Aynsley