The Government has published details of the state guarantee for banks and building societies. The Minister for Finance, Brian Lenihan, said the State would recoup €1 billion over the two years of the scheme.
He also said the new regulations would take the Government deep into the banking system.
The new legislation, the Credit Institutions (Financial Support) Scheme 2008, contains several measures to reassure the public about giving a guarantee to the banks.
Up to two directors will be appointed to the board of each financial institution covered by the scheme. These directors will be selected by the banks from a panel approved by the Minister for Finance.
There will also be measures to prevent the abuse of the guarantee. To this end, a new committee will oversee bonuses and pay of directors and executives.
Bonuses will now be linked to a reduction of risk and long term sustainability of the banks.
The guarantee will cover all loans and deposits at Irish financial institutions. If the guarantee is called upon, the banks involved will have to refund the money.
The Irish Banking Federation said it welcomed the publication of the Credit Institutions Financial Support Scheme.
In a statement this evening, it said the scheme is designed to improve liquidity across the banking system, recognising the central importance of financial services to consumers, business and the wider economy.
'All markets have been impacted by the prolonged dislocation of the international financial system and all governments have had to respond, both unilaterally and through multilateral arrangements, to restore order to financial markets, begin rebuilding confidence, thus creating the conditions for renewed economic growth,' it added.
