John Perry (Sligo-North Leitrim, Fine Gael)
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Question 42: To ask the Minister for Finance the receipts to date from the guarantee provided on covered bank liabilities in each of the six institutions; and if he plans changes to any element of the scheme. [6281/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Seven institutions are covered by the Government guarantee. I referred to six in an earlier reply. I should have said that Postbank is also a guaranteed institution. The covered institutions are AIB, Bank of Ireland, EBS, Irish Life & Permanent, Irish Nationwide Building Society, Anglo Irish Bank and Postbank, their branches and certain named subsidiaries.

Under the terms of the guarantee each covered institution pays the charge quarterly, in advance, payable no later than five working days after the beginning of each quarter, during the period in which the covered institution avails of the guarantee. The charge is calculated by reference to the composition of the covered institution's average month-end covered liabilities during the preceding quarter. Payment in respect of the first quarter was payable at the end of that quarter. That payment was in respect of a covered institution's outstanding covered liabilities as at 30 September 2008. We have received payments from all the institutions for two quarters to date. As of 4 February, €225,709,643.86 is in the mandated account which is held in the Central Bank.

With regard to any planned changes, there is provision in the Act for amendments to certain elements in the scheme, including the charge to the covered institutions. For example, I am empowered to review the application of the guarantee charging model every six months and to make such adjustments as I deem necessary to ensure the recovery of the aggregate cost to be borne by the State as a consequence of the provision of the guarantee, and that the overall objectives of the Act are achieved.

In the context of the six-month review of the guarantee scheme to be completed by mid-April 2009, we will examine how the scheme can be revised subject to European Commission approval and consistent with EU state aid requirements, in ways which include supporting longer-term bond issuance by the covered institutions. This would be in line with international and EU trends where the average term of state cover for bond issues extends beyond 2010.

Kieran O'Donnell (Limerick East, Fine Gael)
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The Minister mentioned €225 million. I would have thought that after two quarters €250 million should have been raised at this stage, which indicates a shortage of €25 million. Which of the banks has not provided that €25 million? The Minister also spoke about extending the scheme. What period of extension does he have in mind? Given that he can review the charges in the terms of the scheme within a six-month period, and given the increased borrowing cost to the State involved, will the Minister be making such an increase in the charge under the guarantee scheme to the banks? What increase does he intend to make?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The purpose of the charge is to cover the long-term cost of borrowing to the Exchequer that arises out of the provision of the guarantee. These additional costs were initially reckoned to be approximately €1 billion. The charging model was based on covered liabilities of approximately €450 billion. As I have pointed out previously, approximately €90 billion of this is covered by the enhanced deposit protection scheme. The covered institutions do not pay the quarterly charge on liabilities covered by the scheme. The total of covered liabilities will naturally adjust over time as bank balance sheets change in the normal course of business. It is fully within my powers to amend the charge to reflect changing events and economic realities. There is provision in paragraph 19 of the scheme to revise the charge if the long-term cost to the Exchequer funding proves higher than initially estimated.

In the first five months of the operation of the charge, it is important that we consider the matter in the context of the review. I did not believe it appropriate to vary the charge to date.

Joan Burton (Dublin West, Labour)
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The Minister spoke about the moneys received to date being lodged with the Central Bank and also indicated that one of the banks may be in arrears. From the figures he gave, it appears that he is still due approximately €25 million on one of the quarterly payments. What does the Minister intend to do with this money? We have a situation in the public finances particularly regarding people who are unemployed. We also know that small and medium-sized businesses desperately need access to credit. Does the Minister plan on simply holding the money in the Central Bank until the end of the guarantee period — probably at around the time of a general election — at which point a large amount of money would become freely available for the Government? The Minister said he would put it back in some way into the national debt. However, that could mean anything. I would hate to think it could possibly become some kind of slush fund particularly when at the moment we need dedicated funds available to get credit flowing to small and medium businesses to keep jobs alive.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I will examine any constructive suggestion made by Deputies. I can assure Deputy Burton that it is not my intention to transform it into a pre-election slush fund.

Richard Bruton (Dublin North Central, Fine Gael)
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Rebalancing in Dublin West.

Lucinda Creighton (Dublin South East, Fine Gael)
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Deputy Burton stole the words from my mouth. I was about to ask a very similar question. The long-term objective is to cover the long-term cost to Government. However, the short-term immediate need is to free up credit for SMEs in particular to allow them to continue trading, thereby keeping people in employment. We all know businesses in our constituencies that are closing on a daily basis because they cannot get overdraft facilities or borrow from the banks. Has any analysis been done as to whether credit is now beginning to flow? There was little or no evidence of this in the first few months of the guarantee scheme or following the recapitalisation of the banks.

Kieran O'Donnell (Limerick East, Fine Gael)
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There appears to be €25 million of arrears. Are any of the institutions in arrears at the moment and, if so, by how much? The cost of borrowing for the State has increased significantly. Will the Minister adjust it on the six-month review to take account of this increase?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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All the covered institutions have paid the charge in a prompt and timely manner and are up to date. In response to Deputy Creighton, of course the difficulty for small and medium-sized enterprises in obtaining credit is a very serious matter and is taken into the Government's consideration. We are at an advanced stage in drawing down the European investment bank facility for a number of our financial institutions.

Regarding the deposit of the money in the Central Bank, it is important that the moneys obtained on foot of the guarantee are seen by international markets to be on deposit in a secure place for any honouring of the guarantee. The credibility of the guarantee is important; partly it rests on the deposit of the funds collected in respect of it at the Central Bank. That said, as I indicated in reply to Deputy Burton, I am open to constructive suggestions about the eventual deployment of these funds on the lapse of the guarantee scheme.