The impact of the Northern Bank raid on the political process is "deeply damaging", Paul Murphy has said.
Paul Murphy will make a statement to parliament
The Northern Ireland secretary said the chief constable, who blamed the IRA for the raid, "did not rush to judgement".
He challenged the IRA and Sinn Fein to state their positions and responses on the £26.5m bank robbery.
He told the House of Commons the appropriateness of continuing to pay assembly members' salaries would have to be considered.
Democratic Unionist Party (DUP) leader Ian Paisley held talks with Prime Minister Tony Blair on Tuesday.
Mr Paisley said that the political process in Northern Ireland was facing a "critical situation".
He said: "We have a paramilitary/terrorist problem and until that is dealt with we are not going to make any progress politically.
"It rests with the government to make those steps to deal with terrorism."
Mr Paisley said that his party was preparing a paper for Mr Blair in which it would set out how the political process could move forward.
He believes that a devolved administration in Northern Ireland could be formed without republicans.
The IRA has said it was not involved in last month's robbery at the Northern Bank headquarters in Belfast and Sinn Fein leaders have said they believe the denial.
Sinn Fein national chairperson Mitchel McLaughlin said his party's participation in the political process was "based entirely on our substantial electoral mandate and nothing else".
He said: "Sinn Fein will not take lectures from any British government on criminality when successive British governments engaged in a policy of
state sanctioned murder against the nationalist community through their control and direction of the unionist death squads."
Addressing the House of Commons on Tuesday, Mr Murphy reiterated his statement that the IRA must give up terrorism.
He said it was "entirely reasonable for unionists to withhold their co-operation".
He added: "If there is to be a political settlement, any illegal activity has to come to an end."
SDLP MP Eddie McGrady said that the government had repeatedly stated that there was no place for terrorism or criminal activity in Northern Ireland politics.
He said: "This is a meaningless mantra as the government continues to appease, and sell out democracy to political Sinn Fein, the IRA in lounge suits."
Mr McGrady said that, in ignoring the criminal activity of paramilitaries that occurs daily in Northern Ireland, the "entire democratic process has been discredited".
Ulster Unionist MP David Burnside said Mr Murphy's statement was "totally empty".
He said: "No action will be taken or penalties introduced against Sinn Fein/IRA. No encouragement has been given to democratic parties to move ahead without Sinn Fein.
"This is a useless and depressing continuation of the present failed political process."
The devolved power-sharing administration in Northern Ireland has been suspended for more than two years.
The Democratic Unionist Party (DUP) and Sinn Fein became the largest parties in the unionist and nationalist communities after elections in November 2003.
But talks aimed at restoring power-sharing broke down before Christmas after months of discussions.