Brian Lenihan Jnr (Dublin West, Fianna Fail)

The Deputy will be aware that a statutory instrument which extends the eligible liabilities guarantee (ELG) scheme to 31 December 2010 was approved by both Houses of the Oireachtas yesterday, having previously received EU state aid approval. The following liabilities are classified as eligible liabilities for the purposes of the ELG scheme: deposits; certificates of deposit; commercial paper; senior unsecured bonds and notes and; other senior debt specified by the Minister for Finance in accordance with EU state aid rules which are incurred in the issuance period, which runs from the date the financial institution received approval to join the scheme to 31 December 2010. The guarantee can be applied to stand-alone debt securities or to securities issued under programmes.

Term deposits with a term of five years or less which are made after the institution joined the scheme and before midnight on 31 December 2010 will be guaranteed for their term. The maximum maturity of any eligible liabilities guaranteed is five years.

My Department and the relevant state authorities along with the EU Commission will continue to monitor market developments over the coming months so as to confirm that the guarantee continues to underpin the core principles of financial stability and funding access for the financial institutions. Progress in relation to the phasing out of the guarantee will be achieved over time consistent with any requirement for continued support of the funding conditions of the banks and the maintenance of financial stability overall. As at end August, €730 million in respect of the CIFS scheme and €295 million in respect of the ELG scheme has been collected in fees from the institutions.

The Deputy may also wish to note that the pricing of the guarantee has increased for new liabilities issued after 1 July in line with the pricing structure outlined in the European Commission's latest guidance on state aid rules for Government guarantee schemes covering bank debt. The additional pricing will range between 20 and 40 basis points depending on the rating of the institution concerned. In addition, the approval granted by the European Commission on 21 September 2010 in respect of short-term liabilities and deposits under the ELG scheme places an additional fee of between 20 and 70 basis points on such short term guaranteed funds issued up to 31 December 2010.

The exact level of the charges accruing to the State will be dependent on the level of issuance by the participating institution.

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