Irish bank plan approved by EU after modifications
Ireland won European Union approval for its plan to guarantee all bank deposits and liabilities after submitting a number of ''clarifications and modifications.''
The modified plan addresses EU concerns including the non- discriminatory coverage of banks with ''relevance to the Irish economy, regardless of origin,'' the European Commission said in a statement.
The approval came as European leaders agreed last night to guarantee new bank debt and use taxpayer money to keep distressed lenders across the region afloat. The agreement at a summit in Paris is aimed at stopping the worst rout in Europe's stock markets in two decades and staving off a recession.
''Modifications agreed with the commission do not alter the basic parameters of the scheme as announced,'' Irish Prime Minister Brian Cowen said in a separate statement. He also said the arrangements in Paris ''do not impinge'' on the Irish plan.
The guarantee applies to Irish lenders Allied Irish Banks Plc, Bank of Ireland Plc, Anglo Irish Bank Corp., Irish Life & Permanent Plc and the building societies Irish Nationwide and EBS. Ireland on Oct. 9 said it would extend the plan to cover the Irish units of Royal Bank of Scotland Group Plc and HBOS Plc, KBC Groep NV's IIB Bank and Postbank, a joint venture between Fortis and the Irish post office.
''We convinced the authorities to avoid any discrimination between national banks and other banks,'' EU Competition Commissioner Neelie Kroes said at a conference today in Brussels. ''We will back you, but you have to respect rules and regulations. Otherwise, we are lost.''
Capital injections
Cowen said last night that the government isn't currently considering a capital injection into the Irish banks.
''We have these instruments available to us as a eurozone group,'' he said in comments broadcast on RTE Radio. ''They are a matter for member states to consider using if required, when required, and I don't want to go beyond that.''
At the Paris summit, which was chaired by French President Nicolas Sarkozy, the key measures announced were: a pledge to guarantee until the end of 2009 bank debt issues with maturities up to five years; permission for governments to buy bank stakes; and a commitment to recapitalize what the statement called ''systemically'' critical banks in distress.
''The patchwork of national measures is gradually filling out to make up a credible global response to the crisis,'' said Bernard McAlinden, head of equity research at NCB Stockbrokers in Dublin. ''These measures should work, but subject to time lags, and the problem is that the economy is already being impacted by the severity of the credit crunch.''
European banks have written down $226.8 billion out of a worldwide total of $635 billion since the U.S. subprime mortgage collapse last year set off the market crisis, according to data compiled by Bloomberg. (Bloomberg)
- Ian Guider and Fergal O'Brien
