merrion street

Finance Minister Michael Noonan today announced that the Bank Guarantee (the Eligible Liabilities Guarantee Scheme (ELG) Scheme) will end for all new liabilities from midnight on the 28th March 2013. After this date, no new liabilities will be guaranteed under the Scheme. The ending of the ELG for new liabilities after the 28th of March 2013 marks a significant step in the normalization of our banking system. It is important to stress that today’s announcement will not impact the vast majority of bank customers as their deposits are covered by the Deposit Guarantee Scheme or DGS – a separate guarantee which has been in operation in Ireland since 1995 and is part of an EU-wide arrangement for deposit protection.

Commenting on the announcement the Minister stated:

I am very pleased to announce the Government’s decision to end the bank guarantee for new liabilities from midnight on the 28^th of March 2013. The Irish banking system failed the Irish people and the mismanagement of the banks and the crisis has cost the Irish taxpayer €62 billion. All of the Government actions since taking office in March 2011, both at home and abroad, are designed to repair this damage and break the negative link between the banks and the State. We are making significant progress in this regard and the ending of the Guarantee for new liabilities marks another step forward.

Among the steps in the Government's banking policy are:

• The completion of independent Stress Tests of the banks’ capital needs in March 2011. These stress tests led to the private sector investment of €1.7 billion in Bank of Ireland in July 2011. The robustness of these stress tests has also allowed the banks to increase their deposits and access to international funding markets.

• The assistance of those in Mortgage Arrears has been advanced through the new Personal Insolvency Regime in 2012 and complemented by the Mortgage Arrears Resolution Strategies being overseen by the Central Bank. The involvement of the Central Bank ensures that they apply to all banks whether State owned or not. The resolution of mortgage arrears is essential to alleviate the mortgage difficulties and ensuring that the banking system is not constraining economic activity.

• The removal of the banks in wind down (IBRC) from the Irish banking system reduces their drag on the economy and the cost of funds for Ireland. The liquidation of IBRC earlier this month removes the legacy of the worst excesses of the boom. The exchange of the promissory notes for long term Government bonds has been acknowledged by all analysts as the achievement of the best possible outcome for Ireland.

• The creation of a cost effective banking system with customer service at its core. The Government is working to ensure that the banks have reduced their cost bases so as they can offer credit at as low a cost as possible, taking account of funding conditions, to their customers. This customer focus is vital in ensuring that the core banks continue to ramp up their SME lending and mortgage lending, both of which increased in 2012.