ECB raps Finance for failing to consult it earlier on guarantee
Published 22/09/2010 | 05:00
THE European Central Bank (ECB) has reprimanded the Department of Finance for not consulting it earlier on the extension of the bank-guarantee scheme until year end.
It said that under European rules, it must be consulted at an "appropriate stage'', so that it has sufficient time to examine bank-guarantee extensions.
In this case, the guarantee is the Eligible Liabilities Guarantee (ELG), as opposed to the blanket guarantee that was agreed in September 2008.
The Department of Finance said yesterday that the extension had been agreed at a very late state with the EU Commission before it went to the ECB.
"The final details of the extension were agreed at a very late stage with the EU Commission. Following this agreement, the approval of the ECB was sought immediately," said a spokesman.
The ECB said it must be consulted in a way that gave it "sufficient time to examine the draft legislative provisions and to adopt its opinion in all required language versions".
In the bank's opinion, which has been sent to the Department of Finance, it added: "The ECB would appreciate the Department of Finance giving due consideration to honouring its obligation to consult the ECB in the future, in accordance with Decision 98/415/EC."
The ELG scheme was originally signed into law in December 2009 and the Finance Minister has the power to renew it at regular intervals. It covers specific issues of debt by the guaranteed institutions.
In his request for approval, Brian Lenihan said an extension of the scheme would mean charging banks more, although this charging regime has yet to be announced publicly.
The ECB said it had not been requested to consider the pricing issue.
The bank once again raised the issue that guarantees given to banks across Europe must be relatively similar.
"Coordination of the duration of national financial support schemes across the European Union is of crucial importance in order to ensure a level playing field,'' said the bank, led by president Jean Claude Trichet.
Its final analysis on the ELG extension was: "Taking into account financial-stability considerations, an extension of the ELG scheme may be beneficial."
Meanwhile, Mr Lenihan has said he welcomes European approval for the scheme.
"The ELG scheme, which will continue to guarantee a broad range of short and long-term liabilities and deposits to the end of 2010, is one of a range of measures in place to support the Irish banking system,'' he said.
He added: "This is an important support to the Irish banking system, facilitating its access to both short and longer-term funding to help maintain the overall stability of the sector."