FT.com 01 Ottobre 2008

Ireland’s government on Tuesday unveiled a wide-ranging guarantee arrangement to safeguard the deposits and debts at six financial institutions in response to turmoil in the financial markets.

The scheme, which guarantees an estimated €400bn (£315bn, $567bn) of liabilities, covers retail, commercial and inter-bank deposits as well as covered bonds, senior debt and dated subordinated debt.

Most depositors were already covered by an existing deposit insurance scheme for up to €100,000. But Tuesday’s initiative was primarily aimed at easing the banks’ short-term funding, which had seized up in recent days.

Shares in the country’s three biggest banks rose sharply after the government announced the immediate start of the scheme, which expires in September 2010, for the deposits in Allied Irish Banks, Bank of Ireland, Anglo Irish Bank, Irish Life and Permanent, Irish Nationwide Building Society and the Educational Building Society.

Allied Irish Banks climbed 20 per cent to €5.95 in early Dublin trading, Anglo Irish Bank jumped 41.3 per cent to €3.25 and Bank of Ireland gained 19.3 per cent to €3.90.

”The guarantee is being provided at a charge to the institutions concerned and will be subject to specific terms and conditions so that the taxpayers’ interest can be protected,” the government said.

Brian Lenihan, finance minister, said the guarantee would make it easier for Irish banks to access funds. ”Since the collapse of several institutions in the US, it has been very difficult to access funds on international markets for Irish banks,” he said. “This will present real problems for the Irish economy if it is not addressed.”

The government moved after Irish banks suffered their biggest one-day fall in share price for two decades on Monday.

Anglo Irish Bank plunged 45 per cent while Irish Life and Permanent, the bancassurer and the Republic’s largest mortgage provider, fell 34 per cent. Allied Irish Banks weakened nearly 16 per cent and Bank of Ireland lost 15 per cent.

Ireland was once dubbed the Celtic tiger economy and seen as a model for the accession states of the European Union. But with its construction and property markets stalling, it last week became the first country among the 15 members of the euro single currency area to declare it was officially in recession.

By John Murray-Brown in Dublin and Neil Dennis in London

Source >  FT.com | sept 30