Parts of bank guarantee extended

Tuesday 07 September 2010 17.49
Brian Lenihan - 'Important support' for banking system
Brian Lenihan - 'Important support' for banking system

Part of the Government's blanket bank guarantee scheme introduced two years ago has been extended to the end of this year. It had been due to expire on September 29. The extension is subject to EU approval.

This means deposits by large companies, deposits by banks and short-term bonds will be covered. What will not be covered are subordinated bonds - usually the last creditors to be repaid in the event of bank's going bust.

As a result of today's decision, a State guarantee for both short- and long-term liabilities will be available up to the end of the year.

This is because another scheme - the Eligible Liabilities Guarantee - had already been extended to the end of the year. The ELG covers certain types of bonds and deposits of up to five years, but it does not cover subordinated bonds.

Finance Minister Brian Lenihan said the move was 'an important support to the Irish banking system' and would facilitate banks' access to short- and longer-term funding to help maintain the overall stability of the banking sector.

The Department of Finance will be liaising with the European Central Bank on the measure, and approval by the European Commission is also needed before the guarantee can be extended.

The Minister reiterated that this announcement does not affect retail deposits of up to €100,000 as these deposits continue to be guaranteed under the ordinary Deposit Guarantee Scheme, which is not time limited.