Cowen rules out plans for SSIA follow-up scheme

The Minister for Finance, Mr Cowen, indicated yesterday that the Government would not develop a follow-up scheme to the €15 billion Special Savings Incentive Accounts (SSIAs).

The State is facing a bill of almost €3 billion when 1.13 million savers cash in an estimated €15 billion when the accounts mature between May 2006 and May 2007.

Commenting on suggestions that the Minister for Social and Community Affairs, Mr Brennan, is examining the possibility of introducing a follow-up scheme, Mr Cowen said that his Department was monitoring the situation.

"I would make the basic point that people have invested in these accounts and this is their own money, and I do not believe the idea that they are all going to go out and splurge and act irresponsibly," he said.

The Minister added that the banks and other financial institutions had the opportunity to create incentives to get people to reinvest their cash as the accounts matured.

Since last year, the financial services industry has been putting pressure on the Government to come up with a follow-up scheme to the SSIAs, claiming that the sudden release of cash into the economy could spur inflation.

However, some commentators have suggested that the banks would be more likely to develop their own incentives to encourage people to reinvest the cash, as it would be a considerable blow if they lost €15 billion in deposits.

The Minister was speaking before addressing the industry body, Financial Services Ireland (FSI), in Dublin.

In his speech, he said the Department had received 24 submissions in response to its request for comments on a Bill that will consolidate the existing laws governing financial services.

The Government asked if the Bill should lay down general principles for all sections of the industry or take a sector-based approach to regulation. It also sought views on balancing the industry's regulatory burden and consumer protection.

FSI chairman Mr William Slattery argued that the Companies Act 2003, which requires a company's annual returns to include statements from directors guaranteeing that the business complies with all relevant regulations, threatened competitiveness because it would increase costs.

"Talking to members, it has become clear to me that initial costs to prepare for the introduction of the directors' compliance statement of between €50,000 and €200,000 for financial companies of small and medium enterprise size are not unusual," he said.