UPDATE 1-Winding Anglo Irish down too costly -chairman

DUBLIN, May 7 (Reuters) - Splitting nationalised Anglo Irish Bank into a 'good' and 'bad' bank remains the least costly option open to the state despite public pressure to wind it down over time, the bank's new chairman said on Friday.

Anglo Irish, which is being propped up solely by massive sums of state capital and which in March posted the biggest loss in Irish corporate history, is preparing to submit restructuring plans to the European Union.

Alan Dukes, chairman, said the EU commission had asked the bank to consider a 20-year wind down as part of those plans, but his preferred option was to carve out a small 'good bank' over the course of the next year.

'People are understandably appalled, as I am, at the cost of getting out of this,' Dukes, Ireland's Finance Minister during the mid 1980s, told reporters on the sidelines of a conference in Dublin. 'Winding the bank down is loss all the way. (The choice) seems to me a no brainer.'

Anglo, which has received over 12 billion euros ($16.1 billion) of state aid with another potential 10 billion promised, will transfer half of its loan book to the National Asset Management Agency, Ireland's 'bad bank' set up to cleanse bank's balance sheets of risky property loans.

(Reporting by Andras Gergely; Writing by Padraic Halpin; Editing by David Holmes)

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