member states do not at this point consider that a US-style plan is needed
The Government has decided to put in place with immediate effect a guarantee arrangement to safeguard all deposits (retail, commercial, institutional and interbank), covered bonds, senior debt and dated subordinated debt (lower tier II), with the following banks: Allied Irish Bank, Bank of Ireland, Anglo Irish Bank, Irish Life and Permanent, Irish Nationwide Building Society and the Educational Building Society and such specific subsidiaries as may be approved by Government following consultation with the Central Bank and the Financial Regulator.
What if the Commission decided the Irish guarantee is illegal state aid? A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
What if the Commission decided the Irish guarantee is illegal state aid?
Anyway, if a bank actually looks like failing it'll probably be nationalised, which I have reason to suspect is the alternative that was being considered on Monday night for one or more banks.
Because that WILL be a vital question, and we cannot ignore it even as we deal with today's emergency requirements. In the long run, we're all dead. John Maynard Keynes
According to the Irish Times:
THE GOVERNMENT'S emergency legislation to guarantee the Irish banking system will allow the State to take a stake in any financial institution that receives financial support from the exchequer. The Bill gives the Minister for Finance wide-ranging powers to protect financial institutions and allows for competition law to be set aside to allow bank mergers, if deemed necessary to protect the stability of the financial system.
The Bill gives the Minister for Finance wide-ranging powers to protect financial institutions and allows for competition law to be set aside to allow bank mergers, if deemed necessary to protect the stability of the financial system.
It was worth €10bn when it was given and results in a reduction of the "cost of capital" which only adds to the €10bn, doesn't subtract from it. A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
FT.com: Pressure mounts in UK to guarantee savings (September 30 2008)
Gordon Brown, the UK prime minister, was facing growing pressure to extend the guarantees on British savers' bank deposits after Ireland promised to underwrite the debts and savings accounts of its six largest lenders in a desperate bid to restore investor confidence in the ailing sector. ... It enraged British and European officials and may fall foul of the European Commission's rules on state aid by offering competitive advantages to some Irish banks. The guarantees make the six lenders more attractive to savers and investors. The European Commission said it was only contacted overnight about the scheme but was looking to see whether state aid was involved. On Tuesday, Mr Brown made it clear he was ready to increase the level at which savers' deposits were guaranteed from £35,000 to £50,000 but indicated he did not want to act until the markets had calmed down. However, the change could come in the next few weeks. But the government is reluctant to offer Irish-style guarantees to British banks and Mervyn King, Bank of England governor, would resist such a move, arguing that any guarantees would represent an unacceptable level of moral hazard.
...
It enraged British and European officials and may fall foul of the European Commission's rules on state aid by offering competitive advantages to some Irish banks. The guarantees make the six lenders more attractive to savers and investors. The European Commission said it was only contacted overnight about the scheme but was looking to see whether state aid was involved.
On Tuesday, Mr Brown made it clear he was ready to increase the level at which savers' deposits were guaranteed from £35,000 to £50,000 but indicated he did not want to act until the markets had calmed down. However, the change could come in the next few weeks. But the government is reluctant to offer Irish-style guarantees to British banks and Mervyn King, Bank of England governor, would resist such a move, arguing that any guarantees would represent an unacceptable level of moral hazard.
