Guarantee may take in other banks

High street retail banks in Ireland which are not Irish-owned may be included in the €400bn guarantee scheme announced yesterday by the Government.

Finance Minister Brian Lenihan indicated this evening he will consider applications on a case by case basis.

The development comes after the British Bankers' Assocation accused the Government of distorting competition by only providing protection for six Irish banks in the bill currently going through the Oireachtas.

TDs are continuing their consideration of the emergency legislation.

The debate on the Committee Stage of the Credit Institutions Protection Bill 2008 resumed just after 9pm.

All stages of the legislation are due to pass through the Dáil and Seanad today.

The Seanad is to sit at 1am to begin its debate. The Leader of the House said he had been assured that the Dáil would have finished the legislation by 12.30am.

Fine Gael leader Enda Kenny earlier called on the Government to extend the law to cover other institutions based in Ireland.

Some foreign owned banks operating here like Ulster and NIB are dismayed by the commercial advantage given to their competitors by the bill, and intensive lobbying went on throughout the day.

Mr Kenny raised the issue during Leaders' Questions this morning but went further in a statement later.

He said the Government had to find a way to secure a level playing pitch.

Speaking at Leaders' Questions this morning Eamon Gilmore said he could not support the measure unless some of the Labour Party's reservations were addressed.

He said the Government was proposing to give a blank cheque to the banks and his party was not prepared to do with taxpayers' money what it would not do with its own.

Labour wants more details on the charges banks will face if they draw down the guarantees and curbs on executive pay in the institutions.

Mr Kenny asked Tánaiste Mary Coughlan if there had been inflows of deposits to the guaranteed banks from those outside the scheme.

The Enterprise Minister said a number of concerns had been expressed about the issue but insisted there was provision in the legislation for the Minister to deal with any problems in the competition area.

The Labour Party wants to cap bank executives' pay in the financial support legislation.

The proposed amendment would prevent the banks paying any of their officials more than the Minister for Finance.

Other amendments in the dozen being put forward by the party would delay the implementation of the Bill until the Minister has published the full terms of the scheme, and a provision that if State funds are used to bail out an institution, a shareholding would be given in return.

Financial stability

The Financial Regulator has said the State guarantee for financial institutions will result in enhanced regulations for banks.

In an interview with RTÉ News, the regulator Patrick Neary said this would cover the areas of corporate governance, strategy and business plans of Irish banks.

A top banking official has said that the Government's move will bring stability to Ireland's financial system.

Irish Life & Permanent Chief Executive Denis Casey, speaking on Morning Ireland, said the Government has made it 'crystal clear' that this guarantee is not a subsidy to the Irish banking system.

He said that the Government's pledge to cover up to €400bn of liabilities will bring stability to the Irish financial system, which would bring stability to the Irish economy.

The guarantee includes retail, commercial and interbank deposits, taking effect immediately and expiring in September 2010.

Mr Casey said that banks will pay the Irish taxpayer for the privilege of using Ireland's balance sheet to allow them to borrow internationally and the capital that is in banks will absorb any losses that arise in their normal course of business lending.

He added that the Government has not guaranteed large corporate loans or large property loans that Irish banks may have loaned.

'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 said.