merrion street

Currently all deposits, to the extent not covered by the Deposit Guarantee Scheme (DGS) in the State or in any other jurisdiction, are automatically covered by the Government Guarantee under the ELG Scheme. While an extension of this Scheme, as already mentioned above, has been decided in order to continue to promote financial stability in the banking system, the Minister also recognises the need to allow the banks to offer products where a Government guarantee is not required.

Therefore, following a request from the participating institutions (i.e. those covered by the ELG Scheme) and in accordance with that provision ( Section 13) in the ELG Scheme to limit categories of deposit covered by the Government Guarantee, the Minister for Finance is granting the banks permission to offer customers (apart from those having retail deposits* as defined in the Rules of the ELG Scheme) the option of making deposits on an unguaranteed basis provided they comply with terms and conditions specified by the Minister in the Notice (see copy attached). The Notice is being published on the NTMA website as is the Scheme Operator.

The option is being confined to corporate and institutional investors at this point (as the banks have indicated that this is where potential demand may be) and will be conditional on: (a) the depositor acknowledging in writing that the relevant deposit will not be guaranteed under the ELG Scheme; (b) the terms of the relevant deposit stating that the deposit will not be guaranteed under the ELG Scheme; and (c) the deposit being made after 16 November, 2011. These conditions make it crystal clear that any decision to place an unguaranteed deposit with a participating institution is a voluntary one and without prejudice to any guarantee that applies to other deposits under the ELG Scheme.

The Minister understands that while the demand to place unguaranteed deposits is still being determined and may be relatively low at this point, the fact that the participating institutions in the ELG Scheme have made their request is a very positive sign of a return of confidence in the banks and the sovereign and should be encouraged. This development, taken with the extension of the Scheme itself, together show that while it may be necessary to continue to provide re-assurance on the security of deposits as a whole in the Irish banking system, there is now evidence that the Government’s overall strategy to re-position and strengthen the banking sector is having a positive effect.

It is important to emphasise that all other existing and future deposits (retail and otherwise) will continue to be automatically covered by the ELG (or DGS) Schemes as applicable, in accordance with the terms and conditions of those Schemes.

* A retail deposit means a deposit that is an eligible deposit within the meaning given by the European Communities (Deposit Guarantee Schemes) Regulations 1995 (S.I. No. 168 of 1995) and which does not exceed €1,000,000.