The Government has comfortably won a vote on the extension of the bank guarantee scheme by 99 votes to 30, though Labour's Tommy Broughan voted against the Government.
The Minister for Finance earlier outlined details of the extension to the Dáil. Michael Noonan said the Eligible Liabilities Guarantee (ELG) scheme, which provides a guarantee for certain bank liabilities, was due to expire at the end of December.
The Minister said the scheme would be subject to six-monthly EU Commission approval. He said approval has been sought and was expected to be given until June 30 2012.
Mr Noonan told the Dáil the ECB had advised the Government that a further extension of the scheme would be beneficial, while the Central Bank and NTMA had also backed its continuation. The need for the extension of the scheme is beyond question, the Minister said.
The institutions covered by the ELG scheme are: AIB, Bank of Ireland, Irish Life & Permanent and the IBRC (formerly Anglo Irish Bank and the Irish Nationwide Building Society) and their subsidiaries, including the EBS.
Mr Noonan said that around €100 billion in eligible liabilities were currently covered under the ELG scheme, down from €147 billion at the end of the third quarter of last year.
The Minister also said that about €1.8 billion in fees had been paid to the State by the banks so far under the ELG scheme. More than half, or €947m, has been incurred in the first three quarters of this year.
Fianna Fáil's Michael McGrath said the debate was taking place against an extraordinary backdrop of uncertainty and fear. He said Fianna Fáil would be supporting the ELG motion, adding that the consequences of ending the guarantee would be extremely serious.
But Sinn Féin's Pearse Doherty said the motion to extend the bank guarantee was the single biggest u-turn in the history of the Dáil. He said Fine Gael and Labour voted against the ELG scheme in 2009 and voted against the extension in 2010, yet they were proposing an extension of the same guarantee today.
Commission extends bank aid rules
Interim EU state aid rules allowing EU governments to bail out troubled banks will be extended until market conditions improve, the EU's competition chief said today.
The move came as banks across the 27-country European Union struggle with a credit squeeze, a capital shortfall and a sovereign debt crisis. The guidelines were introduced during the credit crisis in 2008 for lenders that received a capital injection or transferred impaired assets to holding agencies or so-called "bad banks".
They had been due to expire at the end of the year, having already been extended by 12 months.
"The exacerbation of tensions in sovereign debt markets has put banks in the Union under renewed pressure, justifying the extension of the crisis rules," EU Competition Commissioner Joaquin Almunia said in a statement.
Under some revisions to the rules, valid from January 1, 2012, the fees paid by banks for guarantees on their liabilities will reflect their intrinsic risk rather than the country's risk or market conditions, the Commission said.
There will also be a minimum fee for such guarantees, which will include guarantees for longer term debt between one to five years and for seven-year covered bonds.
Banks were required to restructure their businesses in return for regulatory approval for their bailouts. Lenders that have been recapitalised or benefited from impaired asset measures will still need to restructure.
Banks that are heavy users of state guarantees will need to show they are viable.
