( CNN ) -- Ireland 's government-backed `` bad bank '' is taking on 16 billion euros ( $ 21.5 billion ) in debt from five troubled Irish banks -- a first step toward buying 81 billion euros ( $ 109 billion ) in bad loans , the government announced . The National Asset Management Agency , as the `` bad bank '' is officially known , will pay 8.5 billion euros ( $ 11.4 billion ) for the first 16 billion euros in debt , it said Tuesday . The move takes 1,200 loans off the books of Irish Nationwide Building Society , EBS Building Society , Bank of Ireland , Allied Irish Banks and Anglo Irish Bank . The first two banks ' debts were taken over on Monday and the other three institutions ' bad loans should be transferred by early April , NAMA said . Irish Finance Minister Brian Lenihan gave a sobering assessment of the banks ' health Tuesday . `` I understand why many want us to close '' Anglo Irish Bank , which lost huge sums in property lending , he told lawmakers . `` I understand the impulse to obliterate it from the system . '' But , he said , `` the sums required to rescue the bank are enormous but the costs of winding it down are even greater . '' The government has already replaced the management of the bank . Lenihan hinted broadly that the government will take over Allied Irish Bank , which he said must raise `` additional equity capital of at least 7.4 billion euros ( $ 9.9B ) by the end of the year . '' `` If sufficient private capital is not available , it is probable that the state will have a majority shareholding in Allied Irish Bank as a listed entity , but this is much more preferable than an under-capitalized or only adequately-capitalized entity , '' he said . The government is seeking to sell Irish Nationwide or merge it with another entity as soon as possible , after having taken it over earlier , he said . The Bank of Ireland `` expects to be able to raise private capital and is well advanced in its actions to address its capital needs , '' and EBS is in talks with `` a private party '' about raising market capital , he added . The move is part of an Irish government response to the global financial crisis , which hit Ireland particularly hard . The government expects to complete the purchase of the 81 billion euros in debt by February of next year , a deadline set by the European Union , NAMA said . Borrowers whose loans have been acquired by NAMA will be required to submit a comprehensive business plan in accordance with NAMA 's template within one month outlining how they propose to honor their loan commitments , NAMA chief executive Brendan McDonagh said in a statement . If the plans are not submitted or not approved , `` NAMA will take whatever actions it considers necessary to protect the interests of the taxpayer , '' he said . CNN 's Jim Boulden and Eve Parish contributed to this report .
Move takes 1,200 loans off books . Comment: Government expects to complete purchase of 81 billion euros in debt by February .