Dáil passes State bank guarantee extension

 

THE EXTENSION to the State bank guarantee was passed by the Dáil yesterday, paving the way for covered banks to apply to use the support to raise funding due beyond the two-year blanket guarantee, ending next September.

The Dáil passed the extension to the guarantee under a statutory instrument by 73 votes to 65.

The Government decided to extend the guarantee to cover individual bonds of up to five years to help covered banks raise funding beyond the end of the blanket guarantee next September.

Allied Irish Banks and Bank of Ireland have both raised funding in recent months outside the period of the blanket guarantee.

The extended guarantee has yet to be signed off by Minister for Finance Brian Lenihan, though this is expected shortly. Financial institutions must apply to the Department of Finance to use the guarantee.

A number of financial institutions are expected to seek to raise longer-term funding using the State measure. Irish Life Permanent said last month that it was planning to raise funding through the sale of a three-year bond under the extended guarantee.

A spokesman for the company said it would be applying to use the guarantee and that it would issue the bond “before Christmas or in the new year”, depending on market conditions.

Seven financial institutions covered by the blanket guarantee had paid €295 million in fees for their inclusion in the scheme up to the end of June 2009, according to the Comptroller and Auditor General’s most recent annual report.