The Irish President Mary McAleese will this morning sign off on legislation guaranteeing the liabilities of Irish banks after an all-night session of the Dáil as it became clear that more financial institutions are poised to apply to join the unprecedented government scheme.

The legislation, which immediately triggered inflows of cash from Britain into Irish banks including a reported single corporate deposit of €500 million (£309 million) to one bank, has raised questions in Brussels and London about competition and state-aid rules.

The crisis was triggered by the imminent collapse of a leading bank, which could have started a domino effect. Irish banks are owed €110 billion by builders and developers, who have fuelled a construction boom that has abruptly ended. Ireland fell into recession last week.

The plan, which passed through Parliament with only the opposition of the Labour party, guarantees until September 2010 the deposits and debts of six Irish-owned banks, totalling around €400 billion.

Brian Lenihan, the Finance Minister, said the Government would consider applications for inclusion in the scheme from non-Irish banks with a significant retail presence in the country. The only one he mentioned by name was Ulster Bank, which is part of the Royal Bank of Scotland.

But HBOS, which is due to be taken over by rival Lloyds TSB as part of a government-backed bailout, said it would apply to join the scheme.

HBOS has retail and business banking operations in Ireland under the Halifax and Bank of Scotland (Ireland) brands.

"Whilst it is clear that the Government recognises our strong financial position in designing this scheme, it is important that there continues to be a level playing field so that customers enjoy equal choice from all Irish licensed banks," Mark Duffy, chief executive of Bank of Scotland (Ireland), said in a statement.

Other foreign-owned retail banks include National Irish Bank, which is owned by Denmark's Danske Bank.

The most important change to the legislation overnight was the inclusion of a stipulation that any agreement for support of a financial institution would have to be approved by the upper and lower houses of Parliament.

During the debate, Mr Lenihan confirmed that public representatives will be appointed to the boards of institutions accepting the support. The State was getting deep into the banking system, he said, and must ensure that the taxpayer is protected.

Action would also be taken to prevent what he called excessive risk taking being rewarded in the remuneration of top executives.

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