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Taxpayer guarantee sought for bank loans

THE GOVERNMENT may be expected to guarantee at least some of the money it is provided by the European Central Bank under a new "medium-term facility".

The ECB is close to finalising a facility that would lend money to Irish banks on a "medium-term" basis which would allow Irish banks to end their €70bn dependence on emergency liquidity channelled through the Central Bank of Ireland.

In turn it would give depositors more confidence in the banks' future.

However, it is believed that the ECB will want Finance Minister Michael Noonan, above, to guarantee some of the sums advanced to Irish banks by the new facility, which would mean that the fate of the sovereign and the banks would remain entwined.

The Government guarantee for the €70bn already loaned arose because the "emergency" cash was being secured against assets that would usually be ineligible for the ECB's "main" operations.

The ECB may make an announcement about the new facility after the results of the stress tests are revealed on Thursday.