Bank guarantee extended

 

Minister for Finance Brian Lenihan today announced the extension of the Government guarantee for short-term bank liabilities until the end of 2010.

The guarantee includes corporate and interbank deposits as well as debt securities.

The move comes three weeks before the Government guarantee for six participating institutions expires.

Mr Lenihan said the guarantee extension is an important support to the Irish banking system facilitating their access to both short- and longer-term funding to help maintain the overall stability of the banking sector.

The Minister said today's announcement does not affect retail deposits of up to €100,000 as these deposits continue to be guaranteed under the ordinary Deposit Guarantee Scheme, which was announced in September 2008.

The extension had been recommended by the Governor of the Central Bank, the Financial Regulator and the NTMA.

European Commission approval for the guarantee must be secured before the extension can come into force. The Department of Finance is to liaise with the European Central Bank regarding this, the Government said in a statement.

Mr Lenihan said that following his meeting with European Commissioner competition commissioner Joaquín Almunia in Brussels yesterday he is satisfied that the commission is aware of the proposed extension.

“I am very grateful for the assistance of Commissioner Almunia and his officials in the European Commission for their open engagement and co-operation on this important issue for Ireland and I look forward to continued strong co-operation in resolving this and other significant issues for the Irish banking system in the coming weeks,” he said.

The Minister for Finance met Mr Almunia for more than an hour yesterday for talks on Anglo Irish Bank and the financial sector generally.

Anglo has previously called for an extension of the existing guarantee, as has Allied Irish Banks. There are fears that the removal of the guarantee would seriously undermine Anglo's capacity to retain big deposits it holds for commercial customers.

The extension of the guarantee was announced after the Dublin stock market had closed but the move was likely to boost the shares of Allied Irish Banks and Bank of Ireland tomorrow.

Shares in the two banks finished down nearly 6 per cent.