Martin Mansergh (Tipperary South, Fianna Fail)

Senator Twomey proposes to amend the Short Title and insert a new section 2 to provide the extension of the period of the guarantee under the Credit Institutions (Financial Support) Act 2008 cannot be extended beyond 31 December 2014. I am proposing in this Bill that a provision be inserted into the Credit Institutions (Financial Support) Act 2008 to provide that the Minister for Finance may, by order, provide for the extension of the period of financial support under the 2008 Act beyond 29 December 2010.

As stated earlier on Second Stage, this is an enabling provision to facilitate credit institutions in raising longer term funding. The current bank guarantee scheme cannot be extended using the provision in this Bill unless a new scheme is approved by the Oireachtas under section 6(5) of the 2008 Act. Furthermore, under EU state aid rules, five years is the maximum maturity per debt that will be permitted. An order extending the current bank guarantee cannot be made without EU state aid approval and consultations with the European Commission are ongoing in this regard.

As for the Senator's proposed end date of 2014 for the period of the guarantee, he will understand that a scenario could potentially arise early in 2010 that an institution participating in any guarantee scheme allowing for longer-term issuance may wish to issue a five-year bond, subject to whatever terms and conditions might apply under that scheme. However, were the Senator's amendment to be accepted, this would not be possible without a future change in primary legislation. Allowing the Minister to specify by order the end date for the provision of financial support, as proposed in the Bill, is the most efficient way to deal with this issue from a legislative prospective rather than being obliged to return to the House with the Bill later on this year or early in 2010 to achieve this purpose. It seems sensible, given continuing uncertainty in the financial markets, to retain the flexibility provided by the approach adopted in the Bill. It is important to bear in mind that each extension of the period of financial support must be approved by the European Commission on state aid grounds. The state aid approval will limit any extension of the guarantee for debt with a maximum five-year maturity.