Saturday 17 February 2018

Europe approves six-month extension of bank guarantee

Sarah Collins in Brussels

The European Union has approved the extension of the Government's bank guarantee for a further six months, ensuring senior debt and deposits in the State's main lenders will be covered until the end of December this year.

The Eligible Liabilities Guarantee (ELG) scheme has been in place since December 2009 and is essentially a pared-down version of the blanket guarantee that was given at the height of the financial crash in 2008.

It has already been rolled over twice.

The move means that any bonds and deposits with a maturity of up to five years that are issued or rolled over before December 31 this year will be guaranteed.

Finance Minister Michael Noonan yesterday welcomed the news. "The time extension to the guarantee is part of the necessary state support for the banking sector to facilitate the completion of the institutions' restructuring plans in which they clearly demonstrate their intention to progressively reduce and ultimately eliminate their reliance on the state guarantee," he said in a statement.

The EU will only authorise guarantee schemes for up to six months so it can monitor any problems that might arise.

The European Commission's competition unit said in a statement yesterday that the guarantee was "an appropriate means of remedying a serious disturbance" in the Irish economy and that it was "well-targeted, proportionate and limited in time and scope".

The Government is currently on the hook for €110.6bn under the ELG, according to the latest figures released by the National Treasury Management Agency, which runs the scheme.

It covers debt and deposits in AIB, Bank of Ireland, EBS Building Society and ICS Building Society.

Senior Irish Life & Permanent and Anglo Irish Bank bonds will also be covered -- as well as residual deposits of around €1bn at Anglo -- even though the banks no longer take deposits, the Department of Finance said.

The application to extend the guarantee was made well ahead of its expiry date at the end of June to offer investors some certainty and prevent any market jitters.

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