Cowen denies banks exempt from paying if others default

THE TAOISEACH Brian Cowen has rejected reports that Allied Irish Banks and Bank of Ireland will be exempt from having to make payments if other financial institutions in the bank guarantee scheme default.

Mr Cowen insisted that "the banks are subject to the terms of the guarantee scheme the same as everybody else".

Former Labour leader Pat Rabbitte said the Financial Timesreported on Tuesday that the Government had exempted AIB and Bank of Ireland from "subscribing to the commitment in the guarantee" that in the event of a default, the other banks would be called on to make up the default before the taxpayer would be hit.

Mr Rabbitte suggested that in those circumstances,"isn't the Irish taxpayer entirely vulnerable and entirely exposed". He said the paper also reported that "Ulster Bank is not subscribing to the guarantee".

Mr Cowen said that if there were banks that did not wish to accept the stringency of the conditions in the scheme and the terms of guarantee "that is a matter for them and we would not then guarantee their liabilities or assets".

Insisting it was "not a question of enforcing a guarantee on a bank that doesn't want to take it up", he said that when they made the initial decision to incorporate the six Irish financial institutions, "a strong argument began to emerge in this House that others needed to be accommodated very quickly.

"The point I made at the time was that perhaps they were joining a club, but they did not know the price of that. The price was not that we were giving a guarantee for nothing, so that people would come in under the umbrella and safety of the Irish State".

Mr Rabbitte said "the Government has exempted the two biggest banks and the other major bank, Ulster Bank, is not in. This means the taxpayer is entirely exposed and entirely vulnerable to any default." He asked: "Are Bank of Ireland and Allied Irish Banks in or did the Government exempt them from the most onerous conditions?" Mr Cowen replied that "as Taoiseach, I am answering that the banks are part of the State guarantee scheme the same as everybody else".