Irish bank guarantee unfair, say competitors
By Lisbeth Kirk
The Irish government's €400 billion plan to guarantee deposits and debts of six Irish banks has prompted protests from foreign-owned banks operating in the Republic.
The UK-owned Ulster Bank Group, Royal Bank of Scotland and Denmark's National Irish Bank have asked the Dublin authorities to be covered by the same guarantee, saying they will otherwise suffer a competitive disadvantage, reports the Irish Times.
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"There is a clear risk that customers are going to move their money into another bank, which makes totally sense in the situation, we see in the world today," spokesperson Jonas Torp from Danske Bank told Danish media.
Danske Bank is the parent bank of the National Irish Bank. Client deposits in Danish banks are guaranteed by the state up to €40,000, but this does not cover clients using Irish branches of the bank.
The Irish guarantee also covers customers using UK branches of the six Irish banks concerned.
"If this is legal, then I'm a banana," a British senior banker told UK paper the Times, arguing that the Irish guarantee amounted to unfair state aid.
Irish bank shares crashed this week amid fears that depositors were pulling out their money, but they recovered as soon as the rescue plan was announced.
"In the absence of a Europewide system, there is an onus on the Irish government as the sovereign body with responsibility in this state to take action," Irish finance minister Brian Lenihan said, according to the Financial Times.
Money paid by the Irish state as financial support under the scheme will be repayable with interest once funds to do so are available to the company, the draft bill states.
The European Commission has so far held back on implementing EU state aid rules during the ongoing financial turbulence.
"The European Commission ... is supporting .. the decision of Irish government to guarantee deposits with Irish banks," the commission's chief spokesman Mr Laitenberger said at a press conference in Brussels on Tuesday (30 September).
"This shows that public authorities in Europe can live up to the task of preserving financial stability and protecting savings where different EU countries are concerned."
The Irish parliament is expected to pass the bill today, while Irish Prime Minister Brian Cowen is in Paris for talks with French President Nicolas Sarkozy.
A similar guarantee may be offered by the French government, with measures announced at the end of the week, a spokesperson for the French president said, according to the Irish Times.