IL&P chief says guarantee will bring 'stability'

The Government's guarantee for all bank deposits will bring stability to the Irish financial system, Irish Life & Permanent chief executive Denis Casey said this morning.

Speaking on RTE radio Casey said: "This will bring stability to the Irish financial system, which would bring stability to the Irish economy".

"The government have made it crystal clear that this guarantee is not a subsidy to the Irish banking system. The Irish taxpayer is not going to be exposed in this," Casey said.

The two-year guarantee applies to retail, commercial and interbank deposits and took effect yesterday. It covers up to €400 billion of liabilities.

"We will pay the Irish taxpayer for the privilege of using Ireland's balance sheet to allow us to borrow internationally and the capital which is in banks, the equity capital, will absorb any losses which arise in our normal course of business lending," Casey said.

The move was taken late on Monday after Irish banking stocks came under severe pressure that day amid concerns over their difficulties securing funding.

"The government has not guaranteed large corporate loans or large property loans that Irish banks may have lent," Casey said.

"To the extent that during an economic cycle banks incur losses on those loans, those losses will continue to be incurred by the banks and by the shareholders in the banks," he added.