Government announces end of bank guarantee

Wednesday 27 February 2013 14.32
The Eligible Liabilities Guarantee was introduced on 30 September 2008
The Eligible Liabilities Guarantee was introduced on 30 September 2008

The Government has announced that the bank guarantee will end at midnight on 28 March.

After that date no new liabilities coming from Irish banks will be covered by the Eligible Liabilities Guarantee Scheme, which was introduced on 30 September 2008 after Irish banks' share prices collapsed.

Liabilities incurred since January 2010 and before the scheme's end will continue to be guaranteed until their next maturity, which can last for five years.

Minister for Finance Michael Noonan said the country's banking system was now on the way to being normalised and did not require State aid.

He also stressed that the announcement had no impact on the Deposit Guarantee Scheme, which continues to provide cover for customer savings up to €100,000.

Mr Noonan said that banks were likely to welcome the Government announcement, as they had to pay the State to be covered by the ELGS.

The scheme covered €73bn in banking liabilities from AIB Group - including EBS, Bank of Ireland Group and Permanent TSB Group.

Up to December 2012 the Government had collected €3.8bn in fees from the banks covered by it.

The minister said the end of the scheme had been factored into the Government's financial plans and would have no impact on Budget 2014.

Mr Noonan also said that today's development was part of exiting the EU-IMF bailout as it would help Ireland's cost of borrowing.

Banking industry reacts to Government announcement

Ireland's Central Bank noted the Government announcement and reiterated the fact that the Deposit Guarantee Scheme remained in place.

The Irish Banking Federation welcomed the end of the scheme on behalf of its members and said it marked "a further significant step in the normalisation of our banking system".

AIB Group also welcomed the announcement, which it said demonstrated the "ongoing improvement in the stability of the financial system in Ireland".

In a statement, its CEO David Duffy said the scheme was introduced to provide stability to the sector at a time of "unprecedented market turbulence" but said its end would have a "positive impact on the operating performance of AIB over time".

There was also a positive reaction from Permanent TSB, which described the move as a further sign that Irish banks were "now able to fund their ongoing activities in the market without the requirement for Government support".

Keywords: bank guarantee