DUBLIN 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
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,"
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
LEVEL PLAYING FIELD
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
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
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
"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
He also said he intended to appoint independent people to
the boards of banks covered by the guarantee to represent the
On Wednesday, the country's Financial Regulator
acknowledged the guarantee plan had been beneficial for Irish
"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)