THE Government will still recoup payments from all institutions covered in the bank guarantee scheme should the guarantee be called upon and payments not retrieved from the particular institution involved.
Confusion over the use of the word “indemnity” resulted in reports saying the scheme had been watered down and the Government had dropped an insistence that the industry as a whole help to pay the costs involved in settling the debts of any insolvent bank.
The Department of Finance said the covered institutions have provided an indemnity or an obligation to reimburse for any loss incurred in connection with any payments made under the guarantee.
A spokesman said the technical term for “indemnity” would mean that the banks would have to pay the money back immediately but should a situation like this occur the Government would give banks time to repay the money.
“It is one of the objectives of the scheme that the minister would minimise the cost to taxpayers. As part of that, there is a principle that any payments would be recouped from all the covered institutions, if the payments were not recouped from the particular covered institution.
“However, that is only one of a number of objectives, and in any event the principle is for recoupment in a manner consistent with the covered institutions’ long term viability and sustainability.
“Other objectives include retaining financial stability, safeguarding the financial system and providing lasting stability in the banking sector,” a department statement said.
Meanwhile, Bank of Scotland (Ireland) and Halifax have decided not to join the scheme.
It said this decision has been taken following “constructive dialogue” with the Government.
It said that since becoming eligible to join the Irish scheme, the British government has also introduced its own scheme that strengthens Bank of Scotland (Ireland).
Britain pledged to protect as much as £250 billion (€328bn) of bank debt to help unlock credit markets.
Chief executive of BOSI Mark Duffy said: “While the scheme has its merits, and it may suit some of our competitors to join, from our strong financial position it doesn’t suit us and as currently presented it would ultimately prevent our ability to offer a better deal for our customers.”
AIB, Anglo Irish Bank, Bank of Ireland, Irish Life and Permanent, EBS and Irish Nationwide are covered by the Government’s plan.
Five non-Irish banks have until the end of next week to decide.
A spokeswoman for Ulster Bank said yesterday that it would be making a decision by the end of the week.
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