UPDATE 5-Anglo Irish Bank overshadows govt's bailout efforts

* Finance Minister under fire over Anglo scandal

* Bailout plan to be unveiled at 2000 GMT

* Bank shares slide (Adds bank bailout plan to be announced at 2000 GMT para 7)

By Carmel Crimmins

DUBLIN, Feb 11 (Reuters) - Irish government efforts to restore credibility to the banking sector were in tatters on Wednesday and its own reputation took a serious hit after yet another controversy at Anglo Irish Bank overshadowed an impending bailout package.

Finance Minister Brian Lenihan admitted in parliament he did not know about a multibillion-euro deposit by bancassurer Irish Life & Permanent into Anglo Irish until last month, because he had not read in full a report into the lender's finances that was delivered to his department in October.

Facing calls from one opposition deputy to resign, Lenihan admitted that there had been huge reputation damage done to Ireland, but he insisted that there was no evidence of unusual transfers between other banks.

But questions over whether Anglo Irish had used the Irish Life & Permanent temporary deposits, put at up to 7 billion euros ($9.05 billion) by a source familiar with the matter, to artificially shore up its deposit base ahead of its financial year-end on Sept. 30, were yet another body blow for Ireland Plc.

"The credibility of the Irish financial system or the Irish economy as a sensible place to go and do business is actually starting to be questioned itself," said Alex Potter, an analyst with Collins Stewart in London. "I find that quite horrifying."

The deposits controversy follows a directors' loan scandal at Anglo Irish that precipitated its nationalization and undermines the government's goal of restoring credibility to the banking sector and the wider economy.

Dublin is set to unveil a multibillion-euro bailout package for Allied Irish Banks and Bank of Ireland at around 2000 GMT (3 p.m. EST) on Wednesday.

Some analysts have already said that the scheme, expected to amount to 7 billion euros, may not be enough to cover rising bad debt provisions as Ireland's falling property market shows no sign of stabilizing.

Potter said the delay in unveiling the new package, expected to be a beefed-up version of one announced in December, was late and the government's reliance on preference shares for any capital injection was misguided.

"I've felt from the start that preference capital is just the wrong instrument for this kind of a crisis. It has to be nationalization, it has to be ordinary equity.

WILD WEST

Ireland's financial sector closed down nearly 9 percent as investors reacted to the fresh Anglo controversy, with shares in Irish Life & Permanent, Allied Irish Bank and Bank of Ireland down between 7 percent and 13 percent.

"This is reinforcing the image that is out there that Ireland is the wild west," Brian Lucey, associate professor of finance at Trinity College Dublin, told Reuters. "Can we believe anything on any of the balance sheets of any of the banks?"

Ireland's financial regulator is investigating Anglo Irish's financial affairs, but Lenihan said that Ireland's regulatory structure also needed an overhaul and signaled that the central bank may have more of an oversight role in future.

"The current architecture and the current system did not serve the country well," Lenihan said.

Patrick Neary, who stepped down as head of the regulator last month after an internal report criticized its handling of Anglo, will receive a retirement lump sum of 428,000 euros and another eight months of pay, the government said on Wednesday.

The Irish government is using money from the national pension fund to pay for its bank bailout but its economic health is tied to the beleaguered financial sector after the government controversially guaranteed the debts and deposits of lenders last year.

Bigger bailout packages around the globe have failed to fully revive credit markets. In the United States, the Obama administration's $2 trillion plan did not impress investors, prompting credit spreads to widen and knocking stocks slightly lower. ($1=0.7735 euros) (Additional reporting by Jonathan Saul and Andras Gergely; Editing by Mike Nesbit and Maureen Bavdek)