Image caption The bank's loss was the largest in Irish history

The Irish government has said it will break up the nationalised Anglo Irish Bank as part of the bank's resolution.

The failed lender will be split in two - a funding bank and an asset recovery bank, the finance ministry said.

The asset recovery bank would retain a banking licence, but would focus on managing the existing loans inherited by Dublin when it took over the bank.

The funding bank, meanwhile, will hold all of Anglo's deposits and will not engage in any new lending.

"It will be a stand-alone, regulated bank, completely separated from Anglo's loan assets and it will be owned directly by the Minister for Finance," said Finance Minister Brian Lenihan.

The deposits are guaranteed by the Irish government.

The news comes a week after Anglo announced the largest corporate loss in the history of the Republic of Ireland.

The bank made a record loss of 8.3bn euros (£6.7bn) in the first half of 2010.

The bank got into severe difficulty in 2008 following the sharp downturn in the Irish housing market which left it with substantial bad debts.