The Governor of the Central Bank has said there had been acute pressures on the banking system in the weeks leading up to the Government's decision to guarantee bank deposits.
John Hurley said he told the Minister for Finance on Monday last that 'decisive action' was needed, and he had advised the Government that there was an 'unacceptably high' threat to financial stability.
Mr Hurley said that events came to a head that evening, when the supply of funding to the Irish banking system was seriously threatened.
He said he warned Brian Lenihan of knock-on effects for the wider economy.
The highly concentrated nature of the Irish banking system created a high risk of contagion, he said, and decisive action to protect the stability of the economy and its financial system was needed.
The Governor said that over the coming days, the Central Bank together with the Financial Regulator would be advising the Government on how the scheme introduced by this week's emergency legislation should operate in practice.
Designing such a scheme is a complex task, Mr Hurley said, but work was at an advanced stage and would be completed over the weekend.
Inappropriate email, says Nationwide
Irish Nationwide has described as inappropriate and regrettable an email sent by the son of its CEO seeking business in Britain on the strength of the Government's deposit guarantee.
A Department of Finance spokesman has confirmed that the email, which surfaced yesterday, has been referred to the Financial Regulator.
Michael Fingleton Jnr sent the email to a friend from the Irish Nationwide's London office stating that Irish Nationwide represented the 'safest place to deposit money in Europe with an AAA guarantee from a country with the lowest national debt to GDP ration of any AAA country'.
The email said that deposits attracting fixed term interest rates of 6.75% and 7.1% were guaranteed regardless of size and represented the best value in the UK market.
The email continued: 'Please be so kind as to pass on to friends, colleagues and clients as you see fit.'
The terms 'guarantee' and 'guaranteed' were used six times in the email.
These terms are particularly sensitive because of the negative connotation implied for the British banking sector, which is not subject to the same level of Government guarantee as the Irish-owned banks.
Taoiseach Brian Cowen said the email was 'not acceptable behaviour'. He said the guarantee scheme was not drawn up to allow for predatory practices.
