Tuesday 19 September 2017

'State-aid' bank bailout depends on EC approval as far as 2014

Laura Noonan

Laura Noonan

THE banking bailout plan assumes that the Government guarantee scheme remains in place until 2014 -- even though Europe has only cleared the scheme until the end of June.

The news comes a day after the Central Bank announced that the four main banks need €24bn to insulate them against apocalyptic style losses.

The bailout document, however, reveals that even in the "adverse" case -- billed as an unrealistically bad scenario -- the Government guarantee stays in place until 2014.

This guarantee effectively enables banks to get deposits from customers and businesses and borrow money from other banks, as the Government guarantees repayment.

The guarantee is deemed a form of state aid, however, and so it has to be approved by the European Commission. The EC recently gave permission for the Government to extend the scheme until June.

Extension

A spokesperson for the EC's competition division yesterday confirmed that an extension until the end of 2013, as outlined in the bank bailout document, had not been secured.

"As is the case for the vast majority of banking and other schemes in place since the crisis, the approval is always for six-month periods," she said.

"To answer your question, we have neither agreed nor disagreed on that point (the extension). We will asses the situation. . . as it evolves."

The banking plan includes a steady rise in deposits across AIB, Bank of Ireland, EBS and Permanent TBS until 2014.

If the government guarantee were not extended through the period, the rise in deposits could be jeopardised since people's savings would not be as secure.

The EC has been broadly supportive of the latest package, which it will review next week when the bailout partners will assess Ireland's progress.

Separately, the EC will also have to approve the state-aid elements of the deal.

The Commission is already weighing Anglo Irish Bank's latest business plan, which it has had for more than two months.

A decision on that is expected in the next couple of weeks, Anglo's bosses said on Thursday.

Irish Independent

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