EC approves Irish bank-guarantee scheme

Ireland’s bank-guarantee scheme has been approved by the European Commission.

Taoiseach Brian Cowen last night said EC President Jose Manuel Barosso told him personally the bail-out package had been given the green light by Brussels.

There were concerns the deal, which covers six Irish-owned banks and five foreign financial institutions with a significant presence in Ireland, may have contravened competition regulations.

However, after a summit of European leaders in Paris, Mr Cowen said the rescue scheme, with modifications agreed with the EC that did not alter its basic parameters, was rubber-stamped.

“I very much welcome that, following detailed discussion with the Commission, the scheme is now in compliance with EU requirements,” he said, on his return to Dublin.

“The arrangements that we have agreed in Paris tonight to govern potential future action by member states do not impinge on the Government’s guarantee scheme and I welcome my colleagues' confirmation of this.”

The Irish guarantee originally covered just six Irish-owned banks – Allied Irish Bank, Bank of Ireland, Anglo Irish Bank, Irish Life & Permanent (which owns Permanent TSB), Irish Nationwide Building Society and the Educational Building Society.

However, last week Finance Minister Brian Lenihan announced five other non-Irish institutions with major operations in the Republic would also be included, with some limitations.

These are Ulster Bank, First Active, Halifax Bank of Scotland, IIB Bank and Postbank.

The Government signalled at the time that only deposits at their Irish branches and operations will be eligible for the scheme.

Mr Cowen said the agreement among 15 eurozone leaders to guarantee interbank lending and inject capital into major institutions at risk of failure did not impact on the Irish deal.

The Taoiseach said he made clear to his colleagues that Ireland had already taken effective and decisive action with its already announced rescue package.

However, he insisted the eurozone deal was a very important step in the ongoing international effort to provide reassurance to the financial markets and to the general public.

“It shows the determination of the members of the eurozone to work in a coherent fashion, and to agree on a shared set of measures, or toolbox, which can then be deployed by each member state in the manner most suited to its particular circumstances,” he added.

The Irish pledge, hammered out two weeks ago in late-night talks between the Government, financial watchdogs and top bank executives, covers debts and deposits for two years.