P J Sheehan (Cork South West, Fine Gael)
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Question 9: To ask the Minister for Finance if he has drafted a scheme for the extension of the guarantee scheme beyond 2010; if the premium to be charged will differ from that under the existing guarantee; and his plans to present this scheme to the Houses of the Oireachtas. [44854/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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As the Deputy is aware, I signalled in the Supplementary Budget last April the Government's intention to revisit and make technical adjustments to the Bank Guarantee in ways which would continue to underpin financial stability and also support banks in Ireland in accessing longer-term finance.

In June of this year, the House approved the Financial Measures (Miscellaneous Provisions) Act 2009 which contained an enabling provision to allow for the extension of period of financial support contained in the Credit Institutions (Financial Support) Act 2008 beyond the current expiry date of 29 September 2010 by Ministerial Order. The main elements of the revised guarantee Scheme were announced as part of my second stage speech on the NAMA Bill in mid-September and an outline of the Scheme was also published by my Department at that time. On foot of this, I have drawn up a new guarantee Scheme - the Eligible Liabilities Guarantee Scheme or ELG Scheme which was brought before the Houses of the Oireachtas earlier today. The ELG scheme was approved in accordance with EU State aid rules on 20 November 2009 and following Oireachtas approval it will commence shortly.

The ELG Scheme is intended to facilitate the ability of credit institutions in Ireland to issue debt securities and take deposits with a maturity post-September 2010 of up to five years, on either a guaranteed or un-guaranteed basis. This access to longer term funding in line with the mainstream approach in the EU will help maintain the continued stability of the banking system in Ireland.

Demand deposits will be guaranteed under the Scheme until 29 September, 2010, (subject to six-monthly review by the Commission). Term deposits with a maturity of up to 5 years taken before 29 September 2010 will be guaranteed for the duration of the term.

As is the case for the current CIFS guarantee, the participating institutions in the ELG Scheme will pay a fee for the State guarantee. This fee will be priced in accordance with ECB pricing recommendations and it will be higher than that charged for the CIFS guarantee, albeit for a lower quantum of liabilities.

The revised guarantee Scheme will represent the necessary first steps in the exit strategy for the State from the blanket guarantee offered in September 2008. A key feature of the revised guarantee Scheme is that it allows the participating institutions to access un-guaranteed funding which will help reduce their reliance on State support over time in line with improving market conditions.