State exposure under Bank Guarantee Scheme falls to €346bn

IRELAND’S potential exposure under the Government’s Bank Guarantee Scheme has fallen from a high of €427 billion at the beginning of the year to €346bn by the end of June.

However, figures released in the Annual Report of the Comptroller and Auditor General (C&AG) show that as a proportion of Gross Domestic Product (GDP) Ireland’s exposure at 261% of GDP is far greater than that of any advanced economy.

Britain’s scheme gives it the next highest exposure at 51.1% of the GDP, followed by Sweden at 47.5% and the Netherlands at 33.9%.

The biggest decrease in Ireland’s exposure came in the guarantees given directly to the banks. This stood at €344bn at the end of December 2008 and had fallen to €264bn the end of June. The other component, guarantees given to depositors, fell from €82.5bn in December to €81.6bn at the end of June.

The C&AG’s report also shows the Central Bank, acting on behalf of the European System of Central Banks (Eurosystem), has provided substantial funding to support the liquidity of the banking sector, in the form of lending backed by collateral.

“In practice, it has provided as much liquidity as banks sought, as well as broadening the list of assets acceptable as collateral,” the C&AG’s report states.

These has been a massive ramping up of Central Bank Eurosystem lending to Irish banks, up from €38bn at the end of June 2008, to €130bn at the end of June 2009.

The C&AG report also notes that significant internal costs in relation to staff engaged in the design and implementation of the stabilisation measures were also incurred.

“Up to the end of May 2009, the Department of Finance had paid a total of €3.9 million to Arthur Cox Solicitors for legal advice in relation to the Bank Guarantee Scheme, the recapitalisation of banks and the nationalisation of Anglo Irish Bank.

“In late July 2009, the Department invoiced the credit institutions covered by the Guarantee Scheme a total of around €2.5m in respect of recoupable costs, including €1.6m in respect of legal expenses,” the report states.

The report also shows the Financial Regulator paid a total of €2.95m to PricewaterhouseCoopers and a further €0.84m to Jones Lang LaSalle for financial and property consultancy services in relation to the Bank Guarantee Scheme.

“The Financial Regulator levied fees totalling €3.4m on the relevant institutions up to the end of December 2008,” the report states.

The National Treasury Management Agency paid a total of €7.3m to Merrill Lynch for investment banking advice.

The report shows €3bn has been invested in the State-owned Anglo Irish Bank and the C&AG expects that a further €1bn is expected to be invested in Anglo Irish Bank in the near future.

More in this section

Puzzles logo
IE-logo

Puzzles hub

Visit our brain gym where you will find simple and cryptic crosswords, sudoku puzzles and much more. Updated at midnight every day.

Puzzles logo
IE-logo

Puzzles hub

Visit our brain gym where you will find simple and cryptic crosswords, sudoku puzzles and much more. Updated at midnight every day.