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Banks

UPDATE 3-EU's Kroes: Irish guarantee plan needs fine-tuning

(Adds meeting between Kroes, Lenihan)

BRUSSELS, Oct 6 (Reuters) - The European Union’s competition chief said on Monday Irish proposals to guarantee bank deposits could be tweaked to make them acceptable, while similar plans by Germany appeared to pose few problems.

“I am confident that with some fine-tuning, the Irish guarantee scheme could be put in line with EU law,” EU Competition Commissioner Neelie Kroes told a hearing at the European Parliament.

An initial proposal by Dublin raised concerns over the scope of savings covered and its availability to non-Irish banks, she added.

A statement from the European Commission later on Monday said Irish Finance Minister Brian Lenihan, meeting Kroes in Luxembourg, had confirmed he was addressing the issues raised on possible discrimination between banks operating in Ireland.

“The commissioner and the minister agreed that these issues should be analysed by reference to the position of the beneficiary banks in the national economy,” the statement said.

The two agreed on the importance of steps to guard against undue distortions in financial flows.

“The minister indicated that these concerns would be addressed through the implementing measures, currently being drafted, which will provide for both behavioural controls and quantitative balance sheet controls,” it said.

Kroes, at the European Parliament, said that at first glance, a German pledge on Sunday to guarantee private deposit accounts did not seem problematic.

A European Commission spokesman told a regular briefing: “The measures seem to be limited to retail bank deposits and so less liable to give rise to distortions of competition.”

Ireland issued the first such guarantee last week, prompting criticism of a fragmented European Union response. Germany’s move spurred similar action by Austria and Denmark.

“In general, retail deposit guarantee schemes for savers can be an appropriate policy response regarding the stability of the banking system,” Commission spokesman Jonathan Todd said.

On the Irish measures, Todd said the Commission was looking closely at their scope because they went beyond retail deposits. It was also examining “the extent they may be open to non-Irish banks present on the Irish markets.”

He said Danish authorities had been in touch with the Commission over the past week and the EU executive had received some details of that country’s plans.

“We take note that the guarantee scheme concerns retail deposits and is not discriminatory, apparently,” Todd said of the Danish measures. (Reporting by Dale Hudson, Pete Harrison and Krisztina Than; Editing by Mark John and Jon Loades-Carter)

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