European Union regulators approved the Government's revised plans to guarantee bank deposits and debt to stabilise its financial industry.
The approval means that Irish banks will be more or less guaranteed funding for at least a further five years beyond September next year when the first scheme was due to lapse.
"The new guarantee scheme will give credit institutions in Ireland access to medium-term state-guaranteed financing and provide Ireland with an effective means of restoring confidence in the financial markets, while at the same time limiting distortions of competition," EU Competition Commissioner Neelie Kroes said in a statement yesterday.
The new guarantee excludes subordinated debt and extends to instruments with a maturity of as much as five years, the EU said.
It also emerged yesterday that Anglo Irish Bank hired consultants from KPMG's international headquarters in the Netherlands to help it cost the options now facing the state-owned bank.
KPMG will review all options, including a possible winding down of the lender. The bank must submit a plan on its future by the end of this month. The plan will be submitted to the Department of Finance for the approval of the European Commission.
The European Commission requires all banks in receipt of state aid to submit such restructuring plans and has demanded quite significant actions from bailed-out European lenders, such as selling or running down a significant number of their businesses.
Anglo Irish has received €4bn from the State while AIB and Bank of Ireland each received €3.5bn. All of the banks will also sell property-related loans to the new National Asset Management Agency (NAMA).
Bank of Ireland filed a restructuring plan for the European Commission at the end of September, while AIB submitted its own plan last week.
The first bank guarantee scheme was introduced on September 29, 2008, when the Government put in place a guarantee arrangement to safeguard all deposits, covered bonds, senior debt and dated subordinated debt, with the six biggest lenders: Allied Irish Bank, Bank of Ireland, Anglo Irish Bank, Irish Life and Permanent, Irish Nationwide Building Society and the EBS Building Society.
The guarantee was due to expire at midnight on September 28, 2010, but in July this year the Government introduced a revised scheme aimed at further stabilising financial markets by ensuring lenders have access to financing for at least a further five years.