Ulster Bank may secure guarantee exception


Ulster Bank may be the only non-Irish owned bank to benefit from the financial support scheme, it emerged last night, but the Danish-owned National Irish Bank today signalled it wants to be covered by the €400 billion guarantee.

Following a day of intense lobbying from banks excluded from the scheme, and amid claims from Fine Gael that the scheme might be anti-competitive, Minister for Finance Brian Lenihan came into the Dáil last night to announce that the scheme would not be limited to the six major wholly Irish financial institutions.

However, Mr Lenihan made it clear that the concession would be a very limited one and that each application would be considered on a "case-by-case" basis. However, he referred specifically only to Ulster Bank, which was taken as an indication that it would be an Irish subsidiary of a non-Irish owned bank that would be included.

Mr Lenihan stood over the reasons for including only Irish-owned banks in the original scheme, describing them as "orphans of the storm in international terms because they are not related to any other sovereign State".

He said that the other financial institutions with retail operations in Ireland were ultimately owned by companies from other sovereign States.

However, he distinguished the case of Ulster Bank suggesting that it may be the only one that has a separate and full corporate existence in Ireland and also referring to it having an extensive network retail network.

He told the Dáil: "I understand one of the institutions, namely, Ulster Bank has made an application to the Government and it will give careful and sympathetic consideration to that application. However, I cannot prejudge this evening any the decision the Government might make on this matter."

In a statement today, National Irish Bank, which is owned by the Danish group Danske Bank, said it inteded to apply to be included in the guarantee scheme.

Chief executive Andrew Healy said the bank had highlighted its concerns to the Government that the scheme, whilst "very positive in underpinning the stability of the Irish banking system, could distort competition and create an uneven playing field".

"The scheme in its current form excludes some banks which are an integral part of the Irish economy and commercial life, providing investment, employment and a vital high street presence for consumers and businesses," he said. Mr Healy said it was, in his view, "important that foreign-owned banks, with obvious commitment to Irish jobs, consumers and businesses, should not be discriminated against".

One of the main retail clearing banks, National Irish Bank said it has 200,000 customers here and is an "integral part" of Ireland's payments and money transmission systems.

Fine Gael welcomed the Minister's indication that he would consider applications from foreign-owned banks to be included in the scheme, the Labour Party said the extention might prove to be a "Pandora's Box" exposing Irish taxpayers to billions of euro more than envisaged by he original scheme.

Fine Gael deputy leader and finance spokesman Richard Bruton said:"This move will hopefully help to deal with the equity, fairness and competition issues raised by Fine Gael relating to this matter. It is also hoped that this move will help remove one of the potential barriers to the operation of the scheme as outlined."

Mr Bruton said there may be further work to be done to "ring-fence" the operations covered by the guarantee.

Labour Party deputy leader Joan Burton warned that it had to potential to have very detrimental consequences for the taxpayer. "This move increases further the potential exposure of the Irish taxpayer. We still do not know the full extent of the financial exposure from the original proposal, but this move will clearly extend it significantly.

"When we were first told of the proposed scheme on Tuesday morning, we were assured that it would be limited to the six banks named in the government statement. Where will it now end?

"This development simply confirms that the Government had never fully thought through this proposal and deepens our concern about the legislation," she said.

The Government defeated all of the amendments tabled in the Dáil by the opposition save the two it signalled it would accept. However, several including Fine Gael and Labour amendments calling for cuts in the salaries, bonuses and dividends paid to bank executives were defeated by narrow margins, by 73 to votes to 67.

Working on the basis of nine Government deputies being paired with the Opposition, it meant that six coalition TDs were not available to vote. Government deputies then received a text from the whip's office informing them that they were obliged to be available for all votes.

While rejecting the opposition amendment on restricting pay and expenses, Mr Lenihan did give an undertaking that there would be very strong Government oversight of bank operations, to ensure that none were putting taxpayers at unnecessary risk.

"As a result of this legislation we are going very deep into the banking system and we must ensure that the taxpayer is protected in regard to that intervention," he said.

Mr Lenihan also said that he was concerned about the excessive remuneration approaches which reward short-term performance and excessive risk-taking.

"We will have to insist that those practices are stamped out in these credit institutions. There is the need for a return to traditional banking values in all our credit institutions," he said.