Ireland’s three largest banks may need to set aside up to €3bn ($4.8bn) between them over the next two years to cover their exposure to the deteriorating UK and Irish commercial and residential property markets.

Allied Irish Bank, Anglo Irish Bank and Bank of Ireland face the double whammy of the downturn in the UK and Irish property market, which is expected to “rapidly” force up credit costs, according to a report today by analysts from Canada’s RBC Capital Markets, the investment banking arm of Royal Bank of Canada.