As emergency legislation on the bank guarantee scheme works its way through the Dáil and Seanad, the Government is coming under increasing pressure this evening to extend protection to non-Irish owned banks operating here.

The British Bankers' Association has accused the Government of distorting competition by singling out Irish banks for the guarantee.

'The extent of the guarantee has clear consequences for firms competing to win retail deposits and, while we support proposals aimed at re-reintroducing stability to the financial markets, we need fair play for financial institutions across Europe,' a statement from the association said.

In the Dáil, Fine Gael has called for the scheme to be extended, while the Labour Party has demanded more information about the plan.

A spokesman for the Department of Finance said this evening that any application from a non-Irish owned bank to be included in the scheme 'would be considered.'

Meanwhile, the Financial Regulator has said the state guarantee for financial institutions will result in enhanced regulations for banks.

In an interview with RTE News, Patrick Neary said this would cover the areas of corporate governance, strategy and business plans of Irish banks.

The legislation brought before the Dáil last night sets out a series of dramatic measures the Government can take to maintain financial stability and deal with what it describes as a serious disturbance of the economy.

It was already clear from yesterday's intervention that financial support for Irish-owned Irish banks and building societies, facing difficulties due to the global credit squeeze, would be provided by the Government at some commercial cost.

But this legislation does not stop there. The Government is reserving the right to take out shares in one of the Irish financial institutions if it thinks it necessary.

In addition, the Minister for Finance is taking upon himself powers normally held by the Competition Authority to sign off on a merger or acquisition deal involving an Irish bank if he believes its in the interests of financial stability.

The legislation, in an attempt to re-assure taxpayers, says terms and conditions will apply to any aid it provides to banks but it is short on specifics. Fees and interest are to be worked out between the Department of the Finance and the Central Bank.

The safety net stays in place until the end of September 2010.