EU Commission welcomes updated Irish bank plan

BRUSSELS/DUBLIN (Reuters) - The European Union competition regulators looked set to approve an updated Irish bank guarantee scheme, saying on Sunday it met their concern over state aid.

The European Commission said it would adopt a decision soon. Irish Prime Minister Brian Cowen issued a statement saying the banking scheme had already received a green light in practice from Brussels.

Ireland extended on Thursday its banks guarantee scheme to foreign-owned banks with significant operations in the country, revising its support program for lenders hit by the global financial crisis.

The decision removed a major sticking point with the European Commission, which monitors whether national decisions are compatible with the bloc's laws on state aid and competition.

"The Commission welcomes the revised Irish guarantee scheme," the EU's executive arm said in a statement as euro zone leaders offered fresh pledges of help for the banking sector at an emergency summit in Paris.

"The scheme which has now been submitted by the Irish authorities addresses issues that had been raised by the Commission relating to the maintenance of the integrity of the single market in financial services and compliance with EU state aid principles," it added.

It said a formal decision would be taken soon.

Irish Prime Minister Brian Cowen said in a statement: "The Taoiseach (prime minister) received the news directly from (Commission) President Barroso, who confirmed that the scheme has been approved as being in compliance with the European Commission's requirements."

Ireland was the first of the EU's 27 member states to offer wide-scale support for its banks in response to the escalation of the financial crisis that followed the bankruptcy of investment bank Lehman Brothers.

Its plan initially prompted angry reaction from some fellow EU members, notably Britain, where savers started to shift funds to Ireland, and skepticism in Brussels.

But as the banking crisis spread across the EU, other members states also announced bank rescue plans. Many politicians have said the Commission now needs to be flexible about state aid rules.

The Commission said the updated Irish scheme offered non-discriminatory coverage of banks with systemic relevance to the Irish economy, regardless of origin.

It also provides for a pricing mechanism that covers the funding costs of the scheme and ensures a fair contribution over time by the beneficiary banks.

It includes "appropriate safeguards against abuse of the scheme, including restrictions on commercial conduct and limits to balance-sheet growth."

(Writing by Marcin Grajewski; Editing by Bernard Orr)