Government guarantees deposits for two years
The Government has said it will guarantee Irish banks' deposits and debts for two years, seeking to calm investor concern after banking shares fell 26 percent in Dublin yesterday.
''The Government has decided to put in place with immediate effect a guarantee arrangement to safeguard all deposits, covered bonds, senior debt and dated subordinated debt,'' the finance ministry said in an e-mailed statement.
The guarantee will last until Sept. 2010 and covers Allied Irish Banks Plc, Bank of Ireland Plc, Anglo Irish Bank Corp. Plc, Irish Life and Permanent Plc, Irish Nationwide Building Society, the Educational Building Society and ''such specific subsidiaries as may be approved by government,'' the ministry said.
Ireland joins governments around the world, which have stepped in to protect banks following the seizure in credit markets. The U.K Government yesterday took control of Bradford & Bingley Plc and Fortis received an 11.2 billion euros ($16.3 billion) injection by the governments of Belgium, the Netherlands and Luxembourg to boost its capital base.
''This is an unbelievably positive move for the Irish banking sector,'' said Kevin McConnell, head of research at Bloxham Stockbrokers in Dublin, in a phone interview. ''It's really exceptional.''
Ireland became the first euro-area economy to slide into a recession, as homebuilding plunged amid a slump in house prices. House prices fell 9.4 percent in July from a year earlier. Bank of Ireland Plc, the country's second-biggest bank, said on Sept. 17 it will slash its dividend by 50 percent and post a drop in first-half profit as loan losses mount.
The guarantee is being provided at a charge to the banks and is subject to ''specific terms and conditions so that the taxpayers' interest can be protected,'' the ministry said. (Bloomberg)