Wednesday, 10 November 2010
Dáil Éireann Debate
90. Deputy Brian O’Shea asked the Minister for Finance his plans to extend the issuance period for liabilities covered under the eligible liabilities guarantee scheme beyond end 2010; if he has sought, or intends to seek, EU state aid approval for such an extension; the guarantee income he would expect to accrue to the Exchequer in 2011 if the guarantee were to be extended to the end of 2011 on existing terms and conditions; and if he will make a statement on the matter. [41638/10]
Minister for Finance (Deputy Brian Lenihan): The Eligible Liabilities Guarantee Scheme has been an important support to the Irish banking system, facilitating its access to both short and longer term funding to help maintain the overall stability of the banking sector. It complements the broad Government Strategy to restore fully the banking system and maximise its contribution to overall economic recovery. On the advice of the Governor of the Central Bank, I am extending the issuance period beyond the current end date of 31 December 2010, and on financial stability grounds will be placing an SI before the House shortly which will enable the issuance period to extend to 31 December 2011. As the Deputy may be aware, the European Commission today announced the approval of the Scheme under State aid rules to 30 June 2011 which is the maximum period permitted for state aid approval under the European Commission policy on guarantee schemes.
The Deputy may also wish to note that the ECB has been notified of the intention to provide for an extension to 31 December 2011, and, in its legal opinion of 2 November 2010, has endorsed the approach on financial stability grounds.
If the guarantee were to be extended to the end of 2011 on existing terms and conditions I would expect income in excess of €800 million to accrue to the Exchequer in 2011. However, the yield to the Exchequer depends on a range of factors such as the maturity profile of the liabilities and the extent to which institutions choose to make unguaranteed issuances, all of which are sensitive to prevailing market conditions.
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