Sept 2008: The Irish Government has this morning announced it will guarantee all deposits and borrowings in the Irish banking system.
Which banks and building societies are covered?
The six financial institutions involved are AIB, Bank of Ireland, Anglo Irish Bank, Irish Life and Permanent, Irish Nationwide and EBS Building Society.
How long does the guarantee last for?
The scheme starts immediately and lasts until in September 2010.
See here for What Happens after September 2010
Which banks in Ireland are not covered ?
It does not apply to Ulster Bank, National Irish Bank, ACC, Rabobank, First Active, Halifax, Leeds, Bank of Scotland – who are all supported by overseas parent banks. Credit Unions are not covered either.
Are business accounts covered?
Yes – all deposits retail (personal) , commercial, institutional and interbank are covered as are “covered bonds”
The announcement came following a day of record losses on the Irish stock market which saw Anglo Irish Bank down 46%.
Only last week the Government guaranteed personal deposits of up to €100,000. Now it has gone further to cover all major deposits by financial institutions with Irish banks and building societies. This guarantee also covers all money borrowed by Irish banks from other financial institutions.
The statement from the Department of Finance says that all deposits, bonds and debt will be covered by the State.
Essentially this is a guarantee that if any Irish bank faces serious problems the Government will step in. The two year guarantee is being provided on commercial terms to the institutions.
The backing would be subject to conditions which would protect taxpayers interests.
Extract from Dept Finance Statement
‘The decision has been taken by Government to remove any uncertainty on the part of counterparties and customers of the six credit institutions,’
‘The Government’s objective in taking this decisive action is to maintain financial stability for the benefit of depositors and businesses and is in the best interests of the Irish economy,’
‘This very important initiative by the Government is designed to safeguard the Irish financial system and to remedy a serious disturbance in the economy caused by the recent turmoil in the international financial markets,’
The Irish market has reacted positively to the statement on the guaranteeing of deposits and loans in Irish owned banks.
The ISEQ index was up 3.7% in the first 15 minutes of trade.
The banks are making back some of yesterday’s heavy losses with Anglo Irish Bank soaring 49%, Irish Life and Permanent jumping 40%, Bank of Ireland gaining 22% and AIB up 14%.