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Fine Gael Minister for Finance Michael Noonan Laura Hutton/Photocall Ireland
Bank Guarantee

Noonan announces end of the Bank Guarantee

The Minister said that this marks a significant step in the normalisation of the Irish banking system.

MINISTER FOR FINANCE Michael Noonan has announced the end of Bank Guarantee.

In a statement today, Minister Noonan said that the scheme will end on 28 March 2013. He said that the announcement came following a decision by the Cabinet.

The Bank Guarantee – the Eligible Liabilities Guarantee Scheme (ELG) Scheme – will end for all new liabilities from midnight on 28 March 2013.


According to Noonan, the ending of the ELG for new liabilities marks a significant step in the normalisation of our banking system.

He stressed 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.

The DGS covers deposits up to and including €100,000 per depositor per credit institution or €200,000 in the case of a joint account. The DGS also covers members’ savings with their Credit Union.

Commenting on the announcement the Minister stated:

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.

The Government’s banking policy is a series of steps, all of which are interlinked:

  • 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 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 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,” said Noonan.
  • 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.”
  • The work on improving the cost base of the banks is vital for their return to long term profitability. This return to profitability will be assisted by the shortly to be completed Mercer review of remuneration, which will ensure a full and proper assessment of this significant cost.
  • The Government is determined to maximise the value of this investment for the taxpayer and in the first two months of 2013, it has started to see returns on this investment with the sale for €1 billion of Bank of Ireland Contingent Capital and the sale of Irish Life for €1.3 billion.
  • The success of the State’s bond issuances has played an important role in improving the cost bases of the banks.
  • The Government continues to advance the implementation of the decision taken on 29 June 2012 to break the negative link between banks and sovereigns across Europe.

Ending of the Eligible Liabilities Guarantee Scheme

This announcement also has a broader implication for the State by removing €73 billion of contingent liabilities from taxpayers. In return for guaranteeing such massive sums the State has received fees from the covered banks.

The Minister said that the department had assumed that the ELG Scheme would end in February 2013 and the removal of the scheme will have no negative impact of the budgetary position.

In fact, I am confident that the ending of the scheme and the gradual removal of this liability from the taxpayer will also help to sustain Ireland’s re-entry to international markets.

Fianna Fáil welcomed the announcement, but said it “should not be interpreted as meaning that the Irish banking system is fixed or functioning in a normal way”, according to Fianna Fáil finance spokesperson Michael McGrath.

He added that the banks must “get on top of the mortgage arrears and personal indebtedness crisis by putting sustainable long term solutions in place”.

Minister Noonan said in a press conference following the announcement that the next big project is to have AIB, Bank of Ireland and Permanent TSB “supplying solutions, particularly to people who have problems with their mortgage payments” under the direction of the Central Bank.

Staff have been trained and banks are ready to move forward with this, Noonan added.

AIB also welcomed the news, saying it “further demonstrates the ongoing improvement in the stability of the financial system in Ireland”.

David Duffy, AIB CEO, said:  “We welcome the announcement today and expect that this move will have a positive impact on the operating performance of AIB over time as the bank returns to long term sustainability.”

Read: TDs vote to liquidate IBRC in dramatic late-night Dáil sitting>

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