Lenihan assures depositors their savings are secure

AGAINST A background of growing concern over the stability of Irish banks, Minister for Finance Brian Lenihan yesterday moved to assure consumers that their deposits are safe.

"What I would say to Irish savers is that your deposits are secure and your Government will ensure the stability of our financial system," he said.

"We have been advised by the financial regulator that deposits are safe, that there is no danger to Irish banks, and depositors should be assured that the banks have ready access to funds."

In recent days, speculation has mounted among consumers that Irish bank deposits are not secure, with some going so far as to withdraw their savings. However, speaking ahead of an Institute of Public Administration (IPA) conference, Economic Development - 50 Years On, the Minister was keen to reassure savers that "deposits in Irish banks are secure" and that consumers should not be looking to withdraw their savings.

"Speculation and comment about particular arrangements regarding deposits doesn't necessarily guarantee the overall confidence that we need to maintain in our banking system," he said.

Of speculation that the Government intends to increase the maximum amount it guarantees under the deposit protection scheme from 90 per cent of € 22,222, up to €60,000, the Minister said: "That's something that's always under consideration, but the question of the appropriate time to make such an announcement still has to be decided by the Government, and I don't believe it's helpful in current conditions to speculate about the size of legal guarantees."

Mr Lenihan also welcomed the financial regulator's decision to ban short-selling of Irish financial shares, which led to a dramatic rally in bank share prices on the Dublin market yesterday. "I think that the regulator has taken the right course of action because it's essential that we ensure there is no short-term speculation on our bank shares. It's essential when you have the US and British authorities doing this that we follow suit," he said.

Mr Lenihan acknowledged the problems facing Irish banks in relation to some elements of their commercial lending, but noted that "the banks are working through those problems".

On a possible takeover of Irish Nationwide Building Society by Anglo Irish Bank, the Minister said the Government had not been approached in this regard, but he was unwilling to comment further.

In his speech at the conference, the Minister reiterated the importance of repositioning the economy to pursue export-led growth. "The construction industry cannot be the main driver of growth. That day is gone: we have had our construction boom and now we have moved onto a different phase in our economic development," he said.

Productivity was also a theme of his speech, and he said that, given the current economic difficulties, priority must be given to investment in areas which generate "the most significant returns".

"In the case of public investment, the term 'productive' cannot be limited to investments yielding an adequate return to the exchequer. It extends also to investment which enlarges the national income by creating a flow of goods and services which are saleable without the aid of subsidies," he said.

Asked about the Government's ability to revive the economy in its forthcoming Budget, Mr Lenihan said many of the factors affecting us were outside of our control, adding that "the rapidity with which they have impacted on us has surprised".