British banks today challenged the Irish Government over its promise to give 100% protection for savers, suggesting the move was anti-competitive.
Earlier this week, Finance Minister Brian Lenihan pledged that all deposits at Irish-owned banks would be safe in a bid to reassure the public at a time of global financial crisis.
But the British Bankers’ Association (BBA) today said it was raising the issue with Ireland amid concerns that the move put UK banks at a disadvantage.
The pledge covers six institutions – Allied Irish Banks, Bank of Ireland, Anglo-Irish Bank, Irish Life and Permanent, Irish Nationwide Building Society and the Educational Building Society.
Under the protection pledge, all savings will be guaranteed in their entirety. Protection is also being extended to banks for the value of their own loans.
The move also covers customers at UK branches of Allied Irish Bank, Anglo Irish Bank and Bank of Ireland.
The protection offered is far more generous than the £35,000 (€44,200) worth of savings protected under current UK legislation.
Despite a move on the cards to increase the UK ceiling to £50,000 (€63,000), the Government’s pledge has led to suggestions that customers will move their money out of UK banks to benefit from the 100% protection.
A statement from the BBA read: “We are taking up with the Irish Government its moves to guarantee bank deposits as this has distorted competition, putting banks – particularly those in Northern Ireland – at a competitive disadvantage.
“The extent of the guarantee has clear consequences for firms competing to win retail deposits and, while we support proposals aimed at re-introducing stability to the financial markets, we need fair play for financial institutions across Europe.”