The Irish government is continuing with its programme to rebuild consumer confidence in the Irish banking system, by extending the Credit Institutions (Eligible Liabilities Guarantee) Scheme 2009 (the ELG Scheme), the government’s deposit guarantee scheme, to 30 June 2011. The ELG Scheme was introduced at the end of 2009 as a replacement scheme for the “blanket” deposit guarantee scheme, the Credit Institutions (Financial Support) Scheme 2008 (the CIFS Scheme), which was brought in at the beginning of the financial crisis. The CIFS Scheme expired at the end of September 2010.
The ELG Scheme is intended to last for five years, subject to six monthly approval from the EU Commission. It is narrower in scope than its predecessor. In order to qualify as an “Eligible Liability”, the liabilities:
- Must be with one of the institutions who have signed up to participate. Currently these include:
- Irish Life and Permanent plc
- Bank of Ireland
- ICS Building Society
- Allied Irish Banks, p.l.c.
- Anglo Irish Bank Corporation Limited
- EBS Building Society Irish Nationwide Building Society,
as well as certain of their subsidiaries.
- Must be:
- deposit (to the extent not covered by deposit protection schemes in Ireland or elsewhere);
- a senior unsecured certificate of deposit;
- senior unsecured commercial paper;
- senior unsecured bonds or notes,
or other type of senior unsecured debt specified by the Finance Minister, in compliance with state aid rules and with Commission approval.
- Must not have a maturity date exceeding five years.
- Other than deposits, must not contain an event of default made up of a cross-default or cross-acceleration.
- Must be single currency (Euro, Sterling, US Dollars, any currency permitted by programme documentation, and any other currency which the Finance Minister may approve).
- Must be incurred during an “issuance window” commencing at the commencement date of the ELG Scheme for the relevant institution and terminating on the expiry date (currently 30 June 2011).
The ELG Scheme works in harmony with the pre-existing deposit protection scheme (implemented across the EU some years ago) which covers deposits up to €100,000 per depositor per institution with certain exceptions (such as a body corporate not considered to be a “small company” under relevant legislation).