The ending of the government guarantee scheme for banks will not open up a hole in the public finances the Secretary General Of The Department of Finance has said.
Speaking at the Oireachtas Finance Committee John Moran said the guarantee scheme must be renewed every year by legislation, and the budget planning is based on no new guantee scheme being in place for next year.
The guarantee has been in place since September 2008 when it was introduced in a bid to reassure investors about the health of the Irish banking sector. Fees paid by the banks bring in about €1 billion to the exchequer each year.
"The numbers for the budgetary projections have not assumed any guarantee income for next year, so there is no hole in the public finances if the guarantee is removed," said Mr Moran.
The Secretary General said although the fees would be lost to the exchequer the savings to the banks would improve their capital positions.
"It's about €1 billion a year of reduction in the capital of the banks through the guarantee, so it is better to build up capital and let the banks become profitable," he said.
The Department Of Finance expects the banks to leave the government guarantee scheme in the early part of next year.
Mr Moran told the committee "We would see considerable stability in deposits in Ireland over the past few months, including during period of extreme stress in Europ, spain. We have been doing a lot of work on removing the bank guarantee in the early part of next year. So as next step forward would like to see removal of guarantee early next year".
Asked about the Department's plans for selling the state's shareholdings in various financial institutions he indicated the priority would be to find a buyer for Irish Life. The life assurance and pensions group was put up for sale a year ago but none of the prospective bids proved acceptable to the Department.
"I'm looking to sell the banks, but I dont think they are ready for sale. I would rather sell a life company first," said Mr Moran.
