UPDATE 1-Ireland mulls taking building society stakes-report

(Adds comment from Dept of Finance and source)

DUBLIN, July 5 (Reuters) - The Irish government is considering taking stakes of up to 25 percent in building societies Irish Nationwide and EBS after they transfer soured property loans to a "bad bank" scheme, a newspaper reported on Sunday.

The Sunday Tribune, without citing any sources, said Dublin was looking was looking at using a form of loss-bearing capital called "profit participating deferred shares", similar to the preference shares put into Allied Irish Banks (ALBK.I: Quote, Profile, Research) and Bank of Ireland (BKIR.I: Quote, Profile, Research), for the building societies.

The capital injection would enable the building societies to absorb large write-downs on the property assets when they are transferred to the National Asset Management Agency (NAMA), which is set to be formally established in the autumn.

A spokesman for the Department of Finance declined to comment on the story.

The Sunday Tribune also reported that the six financial institutions covered by an Irish government guarantee scheme may have to pay up to five times more for state protection once a bill extending the scheme beyond the end of September 2010 for some liabilities is passed.

The Department of Finance spokesman said there would be an increase in the cost to the banks to reflect the longer five-year term for guaranteed debt issues.

"The charge for the guarantee will be to recompense the taxpayer for giving the banks this guarantee and will be in line with EU norms," he said.

A source familiar with the set-up of the guarantee, however, told Reuters that five times more than the current charge was too high and wide of the mark.

(Reporting by Carmel Crimmins; editing by Simon Jessop)