Party leader Enda Kenny confirmed his TDs will attempt to vote-down the new bill in the Dail next month.
He suggested the €90bn plan by Fianna Fáil would represent a "double or quits" gamble on the property market.
Speaking in Mayo, Mr Kenny said the Government's move to allow a bad bank to buy up toxic loans was "fundamentally unfair and unwise".
Accusing the Government of trying to "soften up the public for a sweetheart deal for the banks," Mr Kenny suggested ministers had refused to look at alternatives.
If in power, he said Fine Gael would facilitate a 'good bank' with the financial power to offer €20bn to business, in an attempt to counteract the recession.
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He said this ‘national recovery bank’ would have no toxic assets on its balance sheet and, as a result, could lend to small businesses at reasonable rates.
Outlining how the bank would be funded, Mr Kenny said €2bn would be invested by the Government, as well as the capital raised by selling off good loans to the ECB.
"This is not a new idea. Variations of our proposal are already working in other European countries, including France and Denmark, funded by the ECB. So the question must be asked: Why isn’t the Government establishing a "good bank" right now?” he said.
Under Mr Kenny's plans, banks would have until September 2010, when the current bank guarantee expires, to restructure so as to place the risk with the shareholders and the bondholders.
In September 2010, after new stress tests carried out on banks by the regulator, the Government could inject additional financing into the banks, while those that failed to make "real progress" – particularly in their negotiations with bond holders - would be nationalised.
Mr Kenny said bad assets from those banks would be put in a separate property management company.
"This would not be owned by the taxpayers, like NAMA, but by existing investors and bondholders," he said.
(PR/KMcA)
