DUBLIN, Sept 29 (Reuters) - Ireland plans to phase out its state guarantee covering some 400 billion euros ($583 billion) of bank liabilities and it can do so fast if funding conditions remain good, Finance Minister Brian Lenihan said on Tuesday.
Ireland was one of the first countries to respond to the fallout from the Lehman Brothers collapse a year ago, with a guarantee for bank liabilities worth more than double its gross domestic product for maturities of up to two years.
Draft legislation published earlier this month showed it was planning to extend the guarantee for maturities of up to 5 years, instead of the current deadline of Sept. 2010.
Under the draft law, however, guaranteed liabilities would still have to be incurred in the “issuance window” closing on Sept. 29, 2010. [ID:nLG303573]
“We need a phase-out from the guarantee,” Lenihan told public television RTE in a late-night programme to mark the first anniversary of the guarantee. He added that “some of its elements” would be phased out next year but did not elaborate.
Lenihan said the markets’ positive reaction to his 54 billion euro “bad bank” plan, the National Asset Management Agency, had helped banks access funding on their own.
“The good news is that Bank of Ireland BKIR.I and Allied Irish Banks ALBK.I have succeeded in raising funds on world markets without the guarantee,” Lenihan said.
Earlier on Tuesday, Bank of Ireland said it had raised 1 billion euros in a 3.5 year bond, which it said had taken it another step toward the normalization of funding conditions and reflected the success of state rescue measures. [ID:nLT655356]
“If those conditions persist then I believe we can get off the guarantee quite quickly,” Lenihan said. (Reporting by Andras Gergely)