Ireland's government has injected an additional 525 million euros into EBS via special investment shares that will be translated into ordinary shares if the building society is converted into a company.

Bancassurer Irish Life & Permanent and Dublin-based private equity group Cardinal Asset Management, with backing from the Carlyle Group and U.S. investor Wilbur Ross, are competing to take over Ireland's largest building society.

The special investment shares give the Minister of Finance control of EBS which, before the financial crisis, was owned by its members, including the composition of the board and the passing of members' resolutions.

Parliament is expected to vote later on Wednesday on a new banking law giving the government extensive power to restructure the sector. Finance Minister Brian Lenihan said one provision would be to facilitate the conversion of building societies into private limited companies.

Final bids for the building society are expected to be submitted next week and Cardinal is seen as the frontrunner because Irish Life has said it will need to raise 925 million euros if its bid is successful -- a tough call given current market conditions.

It feels like the private equity have a better opportunity, said Ken Darmody, analyst with Goodbody Stockbrokers.

You'd presume they can show the government that they have ready available funds whereas Irish Life have to go off and raise the funds.

Shares in Irish Life, the only major Irish lender to avoid a state bailout, fell more than 5 percent in morning trade reflecting broader market concerns about the euro zone's debt crisis. By 1749 GMT, they had recovered some of their losses to trade down 1.3 percent at 1.1 euros.

The additional government capital will bring EBS' core Tier 1 ratio, a measure of financial strength, to 8 percent by the end of the year.

Under the terms of an 85 billion euros EU/IMF bailout, Ireland has agreed to overcapitalize its lenders and EBS will need to raise an additional 438 million euros by the end of February to bring its Core Tier 1 ratio to 13.5 percent.

The government has already poured 350 million euros -- 100 million euros in special investment shares and 250 million euros in promissory notes -- into EBS to cover losses on property loans and meet tougher capital requirements.

Irish Life has to raise a total of 243 million euros to bring its Core Tier 1 ratio to 12.7 percent. It has said it will generate the funds from its own resources.

(Reporting by Carmel Crimmins; Editing by Hans Peters, Mike Nesbit)

($1=.7506 euros)