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DUBLIN (Reuters) - Ireland passed into law on Thursday an emergency plan guaranteeing Irish bank liabilities of 400 billion euros ($558 billion) to shore up confidence in the country's financial system.
The legislation, which has already triggered inflows of cash from Britain into Irish banks, was unveiled on Tuesday in the wake of a panic-stricken day for Irish financial stocks, and green-lighted by parliament early on Thursday.
President Mary McAleese later formally signed the bill into Irish law.
The plan, which guarantees the deposits and debts of six Irish-owned banks for the next two years, has angered many in neighbouring Britain who say the move is anti-competitive, and raised questions in Brussels about state-aid rules.
In an editorial on Thursday, the London-based Financial Times accused Ireland of "economic nationalism."
"The government has behaved anti-competitively and the protection it is offering could even destabilise other banks," it said.
Irish banking sources told Reuters on Thursday there had been an uptick in money flowing to the country's banks but levels were not dramatic.
"Yes, money has come in across the board but I think it's pushing it a bit to talk about torrents of cash from the UK -- some of the coverage of this has been a bit over the top," said one Irish banking source who asked not to be named.
As pressure mounted, the Irish government said it may extend the scheme to foreign banks with retail units in Ireland and that applications would be considered on a case-by-case basis.
Ulster Bank Group, part of Royal Bank of Scotland Group Plc (RBS.L), British bank HBOS Plc HBOS.L, and National Irish Bank (NIB), which is owned by Denmark's Danske Bank (DANSKE.CO), have all requested inclusion in the scheme.
"We intend to apply to go into the scheme and expect to be successful," a spokeswoman for RBS said.
HBOS, which is due to be taken over by rival Lloyds TSB Group Plc (LLOY.L) as part of a government-backed bailout, has retail and business banking operations in Ireland under the Halifax and Bank of Scotland (Ireland) brands.
"Whilst it is clear that the government recognises our strong financial position in designing this scheme it is important that there continues to be a level playing field so that customers enjoy equal choice from all Irish licensed banks," Mark Duffy, chief executive of Bank of Scotland (Ireland), said.
NIB said it was important that "foreign-owned banks with obvious commitments to Irish jobs, consumers and businesses, should not be discriminated against."
Other foreign-owned retail banks operating in Ireland include IIB Bank, owned by Belgium's KBC, and Dutch-owned Rabobank.
Irish banks have so far survived the credit crisis, avoiding the massive writedowns on toxic assets seen at foreign rivals, but a simultaneous collapse in the country's property market has seen their share prices dive over the last year.
Pressed by lawmakers to put a cap on bank executives' pay, Finance Minister Brian Lenihan said the terms and conditions of the state guarantee would also address remuneration issues, which he said had been among the main causes of global financial turmoil.
"For the future, sensible and long-term sustainable remuneration policies must be part and parcel of how financial institutions go about their business in Ireland," Lenihan told deputies.
He also said he intended to appoint independent people to the boards of banks covered by the guarantee to represent the public interest.
On Wednesday, the country's Financial Regulator acknowledged the guarantee plan had been beneficial for Irish banks.
"The measures taken have had a positive impact for the funding profiles of Irish banks. However, this is against the background of an international money market that remains tight," a spokeswoman said.
The Irish Times reported on Thursday that one Irish bank had received a single corporate deposit of 500 million euros ($697 million) following the announcement of the guarantee.
Additional reporting by Steve Slater in London; Editing by Greg Mahlich and Sue Thomas