The Commission stated its concern about the banks, which have received more than €60 billion in State aid, suggesting the proceeds of the deal to scrap the Anglo Irish Bank promissory note scheme could be used to further reduce debts.
These new warnings from the Commission come at a time when the Government revealed the amount of bailout loans it would need to repay between 2015 and 2022 would fall by more than €21 billion as a result of a deal with EU authorities to extend the maturity of its loans.
Documents laid before the Oireachtas yesterday revealed the Government will now repay €96.1 billion instead of the €117.5 billion of which they were previously liable.
In a bid to stabilise the national economy, the Commission believes action is needed to tackle loan arrears and lending on multiple fronts.
It expressed anxiety at signs of "some lenders continuing to provide unsecured credit to highly indebted borrowers without adequately checking their creditworthiness".
In defiance of demands within the Coalition to use promissory note savings, in a bid to ease spending cuts and tax measures, the Commission insists the Government remains bound by its existing agreements with the EU-IMF troika.
These arrangements obliged the Coalition to "seize opportunities to accelerate reducing the gross debt ratio, which would encompass the savings generated by the promissory note operation".
The Commission also reiterated expenditure should be contained in other areas such as the health service, where spending overruns have inexplicably occurred.
Image: Yanni Koutsomitis