Tuesday 22 May 2012

Government makes request to extend bank guarantee


THE Government has formally asked the European Commission for permission to extend Ireland's infamous bank guarantee scheme until the end of the year.
The Department of Finance  confirmed last night that it had asked to extend the €93bn scheme beyond the end of June on the same "general conditions" that are in place now.
The extension request comes as Greek banks report a massive outflow of deposits with €800m withdrawn last Tuesday alone, while deposits in Spain have reportedly also come under pressure.
Irish banking sources last night stressed there had been "usual" deposits trends at the Irish bailed-out banks this week, despite the unrest in the eurozone.
Irish bailed-out banks suffered a massive flight of deposits in 2010 and 2011, as international deposits fell by almost €100bn and Irish deposits dropped about €60bn.
Deposits have stabilised in more recent months, and banking sources last night said there had been no "unusual" movements as a result of this week's eurozone woes.
The Department of Finance nonetheless decided to renew the guarantee scheme, since Ireland's banks are still believed to be too weak to hold mainstream deposits and issue bonds without a safety net.
A spokesman for the department confirmed the extension notification had been submitted to the EC's Competition division and a response was expected in June. The guarantee fees will stay at current levels - about five times higher than those charged by the original blanket guarantee.
The sums guaranteed have also fallen significantly.

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