The European Commission has extended the Bank Guarantee Scheme until the end of the year.

The guarantee had been initially approved last November and was extended at the end of May.

The commission said it considers the extension to be in line with its guidance on state aid to banks during the financial crisis and on the phasing out of support measures for the financial sector.

'The extended measures are well targeted, proportionate and limited in time and scope,' the commission stated.

Welcoming the move, Minister for Finance Brian Lenihan said the scheme will continue to support the funding needs of the financial system so it can assist in the economic recovery, through providing credit to protect and create jobs.

He added that it does not affect retail deposits of up to €100,000.

These continue to be guaranteed under the Deposit Guarantee Scheme, which does not have an end date.

The commission also extended similar guarantee schemes in Spain and Denmark as well as a liquidity scheme in Hungary.