DUBLIN, Oct 4 (Reuters) - The rate Irish banks will pay under the government’s plan to guarantee 400 billion euros ($554.3 billion) of liabilities should not cripple institutions, Anglo Irish Bank Chairman Sean FitzPatrick said on Saturday.
The plan, which guarantees the deposits and debts of six Irish-owned banks for the next two years, was unveiled on Tuesday in the wake of a panic-stricken day for Irish financial stocks, and passed into Irish law on Thursday.
Ireland’s central bank chief John Hurley said on Friday details of the scheme, which has already triggered inflows of cash from Britain into Irish banks, were being finalised over the weekend. The specific details are expected to be presented to the government next week.
“Everyone has got to be reasonable in this,” FitzPatrick told public broadcaster RTE on Saturday.
“The banks should pay for it, but they should not be crippled in what they are asked to pay either. The cure should not be worse than the ailment,” he said in an interview.
Hurley said the scheme, which has aimed to shore up confidence in Ireland’s financial system, would be developed in such a way as to charge a commercial rate for the benefit of the state guarantee.
It is understood that banks will enter into individual contracts with the government to be covered under the scheme, Irish media have reported.
The government and the central bank will seek up to 2 billion euros in charges from Irish institutions covered under the scheme, the Irish Times said on Saturday, without citing sources.
A finance ministry spokesman declined to comment on the report when contacted by Reuters.
FitzPatrick declined to comment to RTE on the report.
“We are very grateful to the government for what they did, we are very mindful that we are given a lifeline to go forward, to repair our balance sheets and we know what duties and obligations we have arising out of that chance,” he added.
Irish banks would have to take into account the views of the taxpayer, Fitzpatrick said. “This is a whole new paradigm, I think, for the boardrooms of Irish banks.”
The global liquidity crisis had put the Irish banking system on the “brink” before the government stepped in with its plan, Fitzpatrick added.
“If the Irish banking system had collapsed there would have been chaos here and the real economy would have suffered,” he said. “We would have been in uncharted territory and anything could have happened.”
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 shares dive over the last year.
“Anglo Irish Bank has made mistakes and it has made mistakes in the past because we are in the business of risk,” FitzPatrick said. “Have we been reckless? No. We have we covered all our loans in a belt-and-braces way.” ($1=.7216 Euro)