Brian Lenihan Jnr (Dublin West, Fianna Fail)

This issue was raised in the other House and I outlined the position in my reply to the Second Stage debate in this House. As this legislation is drafted and in its preparation, it was always intended to cover all credit institutions.

A credit institution is a term of art in European Union law. In theory, the legislation might apply to all EU institutions, but there is no intention for it to do so. The intention is to protect those institutions related to the financial instability, which primarily refers to the six domestic Irish banks. An assessment would need to be made of the banks based in Ireland that are owned by foreign companies. An assessment would also need to be made on a case-by-case basis of subsidiaries of Irish banks abroad and the extent to which they pose a systemic threat.

Given the asset and liability figures in this area, we must be cautious. On the one hand, Senators are questioning the size of the cushion and, on the other, representations are being received from banks to the effect that they wish to avail of our sovereign guarantee.

Non-domestic banks fall into two categories. The first consists of those that are fully established as corporate entities in Ireland and subject to regulation by the Financial Regulator, but operating as subsidiaries of foreign banks. The second consists of banks that do not have a distinct corporate existence here or clearance from the Central Bank and are not subject to our regulation. Rather, they are regulated from their home countries much as we regulate some external banks through our regulator. There is a distinction between the two categories.

Ulster Bank has made an application to the Government to be considered for inclusion on the list, which we will do having regard to the issues of the stability of the financial system and the legal advice we receive on competition and State aid matters. We will examine the application sympathetically because of its large branch office, but I cannot commit the Government on the issue at this stage.