Dáil Éireann Debate, Thursday - 4 October 2012
23. Deputy Niall Collins asked the Minister for Finance his plans for the operation of the eligible liabilities guarantee; the implications for the public finances of any change to the scheme; and if he will make a statement on the matter. [42294/12]
Amharc ar fhreagraThe Deputy will be aware that the continuation of the ELG Scheme (Scheme) which has been in operation since 9 December, 2009, is subject to approval by the EU Commission every six months under State Aid Rules. The current issuance period (during which new liabilities may be guaranteed),which was approved for prolongation by the EU Commission on 1 June last, is due to terminate on 31 December, 2012. As part of the bi-annual review process, the Central Bank of Ireland (CBI) and the National Treasury Management Agency (NTMA),the Scheme Operator, have been asked for their assessments of the case for further prolongation of the ELG Scheme beyond December, 2012. When these assessments have been made available to me, I will take them into account along with the advice of my Department before deciding on whether or not to seek approval from the EU Authorities to extend the issuance period of the Scheme.
At the same time, an inter-Agency Working Group led by my Department is currently working with the brief to develop a roadmap to provide for a winding-down of the Scheme consistent with preserving financial stability. The outcome of the Group’s deliberations will be discussed with the Troika Authorities over the final Quarter of this year.
As regards implications for the public finances of any change to the Scheme, the Deputy will be aware that, under its terms, Participating Institutions are obliged to pay fees to the State in respect of their outstanding guaranteed liabilities. The fee rate is determined by the EU Commission and is reviewed on a regular basis. Any decision to alter current rates would consequently have an impact on the amount of fees currently being generated by the Scheme.
The fee income expected to be received in 2012 by the Exchequer is of the order of €1bn. Any decision in the future to end the Scheme would ultimately eliminate this income. The extent of the impact would depend on how such a move was managed but as fee income is paid quarterly in arrears and as any existing guarantee –and therefore corresponding fee - would continue to apply until the maturity of the liabilities concerned, income would tend to reduce on a gradual basis. Any such change in fee income accruing to the Exchequer in the future would be taken account of in the normal Budgetary arithmetic.
I am conscious that the current level of fees being paid by the Participating Institutions in the ELG Scheme is unsustainable in the long term and is having a negative impact on their profitability. With this in mind, and with my encouragement, Irish covered banks’ subsidiaries in the UK have been reducing their participation in the Scheme during 2012 by not taking on new, guaranteed deposits under the Scheme. As indicated above in the measures that I outlined, it is my intention to examine ways in which this process can be continued here in Ireland with a view to developing a plan for an orderly withdrawal of the Scheme at an appropriate time but which would, of course, continue to honour the terms of all current guarantees under the Scheme.
