Written answers
Wednesday, 17 December 2008
Department of Finance
Financial Institutions Support Scheme
8:00 pm
Joan Burton (Dublin West, Labour)
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Question 203: To ask the Minister for Finance if the charging scheme of the bank guarantee scheme foresees a mechanism for a reappraisal of the overall gross charge in view of developments in the pricing of Irish long term sovereign debt when this change in pricing arises either directly or indirectly from the introduction of the bank guarantee scheme; and if he will make a statement on the matter. [46957/08]
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The thinking behind the Charging Model is set out in some detail in the Annexe to the Scheme. However, the main principle is that the Minister for Finance estimates an aggregate cost that the State will bear as a consequence of the guarantee and each covered institution will pay its share in accordance with its risk profile and the guarantee charging model, subject to the estimated cost to the Exchequer being fully recouped. In case the actual cost for the State is higher, the charge will be adapted accordingly.
The Deputy will be aware that a cost of €1 billion over two years was the original estimate for recouping the cost to the State of extra borrowing. Nothing has yet arisen to suggest that this estimate was inaccurate. The cost of public borrowing constantly changes in the financial markets in response to many different influences, and there is no reason to suggest that these changes are all driven by the guarantee scheme.
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