John Paul Phelan (Carlow-Kilkenny, Fine Gael)
Link to this: Individually | In context

Question 77: To ask the Minister for Finance the rationale for the Government guarantees of the Irish banks in September 2009; the nature, extent and limitations; and if there is an expiration date for the guarantees. [40662/11]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context

I assume the Deputy is referring to the Guarantee introduced in September, 2008, and not September, 2009. The Deputy will be aware that the previous Government announced the Credit Institutions (Financial Support) Scheme ("CIFS") on 30 September, 2008, in order to maintain financial stability for the benefit of depositors and businesses in general, and for the Irish economy as a whole. This action was taken following advice from the Governor of the Central Bank and the Financial Regulator about the impact of the international market turmoil on the Irish banking system.

The CIFS expired on 29 September, 2010, and was effectively superseded by the Credit Institutions (Eligible Liabilities) Guarantee Scheme ("ELG Scheme") which came into effect on 9 December, 2009. The main differences between the CIFS and the ELG Scheme are:

· the duration of the guarantee for fixed-term deposits extended from the 2 year limitation under the CIFS to 5 years under ELG Scheme;

· the exclusion of dated subordinated debt and asset covered securities from the ELG Scheme.

Following the recent approval by both Houses of the Oireachtas the terms of the ELG Scheme have been extended in law to 31 December, 2012, subject to EU Commission approval every 6 months. On Thursday last, EU state aid approval was given to the prolongation of the issuance period for eligible liabilities to 30 June, 2012. The prolongation of the ELG Scheme is seen by the State authorities as necessary for financial stability reasons given the continuing market dislocation for Sovereigns and banks.

Further information on both Schemes, including the liabilities covered, can be obtained on the Department of Finance website (http://www.finance.gov.ie)