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11/29/2012 12:00:00 AM


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Fleming, Sean

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Credit Institutions (Eligible Liabilities Guarantee)(Amendment) Scheme 2012: Motion

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Credit Institutions (Eligible Liabilities Guarantee)(Amendment) Scheme 2012: Motion

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Credit Institutions (Eligible Liabilities Guarantee)(Amendment) Scheme 2012: Motion

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Senator


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Deputy Sean Fleming

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Sean Fleming

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Snippet Contents:

I welcome the opportunity to speak on the motion, which in essence is to extend the Credit Institutions (Eligible Liabilities Guarantee) Scheme 2009 for a period of 12 months, up to the end of December 2013. That is subject to continuing EU state aid approval. It is important to state that at the outset.
The current guarantee expires on 31 December 2012. We are talking about extending the scheme only for new deposits made in 2013. Existing deposits are guaranteed by the scheme until their maturity date. As the Minister of State indicated, we are talking about deposits of more than €100,000. It must be said, in the week before the budget, that if one has less than €100,000 in one’s account in a bank, post office, credit union or State savings bank, or with An Post or Postbank, they are guaranteed by the Central Bank. One need not have any fear in that regard. When people hear the issue being discussed in the Dáil they often get worried, especially older people. We want to reassure them in that regard.
The order will extend the liabilities scheme for a further year, subject to the approval of the European Commission. The Secretary General of the Department of Finance, John Moran, recently indicated that, if possible, he would like the covered institutions to stop using the guarantee scheme in early 2013. He was more specific than the Minister on the matter. That is his target and he has stated it on the record. He said the income from the guarantee was not accounted for in Ireland’s medium-term fiscal projections published earlier this month. The Department is saying that there is an income of €1 billion and that it will have a budgetary implication. It is important with regard to the memorandum of understanding, meeting our fiscal targets by 2015 and working our way out of the IMF programme at the end of next year. The Secretary General of the Department of Finance was categoric in saying that the continued guarantee is not accounted for - in other words, he presumes it will no longer be in place. The Department did not build it into its medium-term fiscal projections which the Minister for Finance published recently. That must be said. The scheme is on its way out and the Government does not expect it to continue into the future. It is important that this is taken into account. While there is a loss of income, this is already factored into the Government’s medium-term fiscal projections.
Currently the scheme costs the banks approximately €1 billion, which does have an impact on their profitability. Both Bank of Ireland and AIB have deposits in the United Kingdom not covered by the scheme and at the end of September approximately €78 billion was guaranteed, with €56 billion of that by way of deposits and the balance of €22 billion by way of guaranteed bonds. The amount covered has fallen since the original guarantee was introduced in 2008, as shown in the schedules. Both AIB and Bank of Ireland recently issued covered bonds, backed by loans to customers, which were unguaranteed. That suggests the banks are almost ready to fund themselves without the aid of the guarantee. The majority of deposits guaranteed are now in this country as the main banks' UK deposits are not guaranteed. Even if the ELG scheme was not renewed, deposits in Irish banks of up to €100,000 would be protected.
The main banks joined the ELG scheme on 4 and 11 January 2010, while the EBS joined on 1 February 2010. Irish Life & Permanent, Bank of Ireland, ICS Building Society, Bank of Ireland Mortgage Bank, Allied Irish Banks plc, Anglo Irish Bank Corporation Limited, EBS and Irish Nationwide are all covered under the guarantee scheme, although some of them have changed their formats and their names. In addition, a number of subsidiaries are covered. I do not expect the Minister of State to have time to reply on the matter but I would welcome the sending of a note to me and to the spokespersons in this regard. I understand that when the scheme came into operation in 2010, Irish Permanent (IOM) and Bank of Ireland (IOM) became involved in the scheme. Bank of Ireland (UK) plc joined the scheme in July 2010. AIB Group (UK) plc is involved in the scheme, while AIB (CI) limited joined the scheme in 2010.