Brian Lenihan Jnr (Dublin West, Fianna Fail)

The relevant State authorities will continue to monitor the funding situation of Irish banks and the requirement for the guarantee in the future. Markets are currently dislocated. The EU state aid rules provide that the guarantee can be extended for a maximum of six months on each occasion. We will revisit the requirement for an ELG scheme in consultation with the European Commission and the European Central Bank in advance of the current deadline of 31 December 2010 and will judge the need for an extension on the basis of market conditions at that time and the specific funding position of the Irish institutions having full regard to financial stability matters generally.

None of the decisions taken during this crisis has been easy, but we have acted swiftly. It is imperative that the House is fully aware of the consequences of not approving this scheme. The Irish banking system continues to experience significant pressures in regard to its funding requirements. These pressures have intensified in recent weeks as market sentiment toward Ireland has become more negative, reflecting concerns about the scale of the losses in our banking system and significant imbalances in our fiscal position. The State guarantee for bank liabilities provided under the ELG scheme, which the Government has put forward for approval by the Oireachtas this evening, continues to provide very significant support for the funding of the banking system. If the scheme is not extended to the end of the year then make no mistake, we will be faced tomorrow with difficulties in funding which will jeopardise the financial stability of the State. That is the advice of the Governor of the Central Bank and the regulator who both strongly endorse the need to extend this scheme to safeguard the stability of the system and the overall economy.

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