Irish Banks Get Government Lifeline

Customers of Irish banks are now having their cash 'covered' after a surprise move from the Irish government late yesterday that it will "guarantee all deposits".

The high-risk move had an almost immediate positive impact on early trading today, with the ISEQ index of Irish shares opening 3.4% higher, at 3,412 points.

The Irish Finance Minister Brian Lenihan said deposits of up to €100,000 had been guaranteed in Irish banks.

The guarantee to all deposits applies to the Bank of Ireland; Allied Irish Bank; Anglo Irish Bank; Irish Life and Permanent; Irish Nationwide Building Society and the Educational Building Society.

It does not apply to the Ulster Bank, National Irish Bank, Rabobank or ACC, which are subsidiaries of large international banks, and as yet, it remains unclear how NI customers of the 'covered' banks will be affected.

Brian Lenihan explained the move was designed to "secure the stability of our banking system" as it was becoming increasingly difficult for banks to secure funds on world markets.

"If funds are not secured by the Irish banks it would be a very, very serious matter for economic life in this country.

"I think every, business, every worker knows how short those funds have been in the past year. If they dry up entirely that is very, very serious for Ireland," he explained.

The Minister added the Government has "drawn up contingency plans for every scenario" or difficultly that Irish banks may face, but declined to elaborate.

He denied the measure was a "bailout" of Irish banks, saying the facility was subject to a charge or a levy. The level of that charge will be set by the Central Bank, he said.

The move covers all money borrowed by Irish banks from other financial institutions. The guarantee takes effect immediately and will expire at midnight on September 28th, 2010.

In other global financial news, officials from the Bush administration and senior US Republican and Democratic party politicians are to continue negotiations to try to 'bring forward legislation' to ease the financial crisis on Wall Street.

It follows the defeat of a $700bn rescue package in the House of Representatives yesterday.

Later today President Bush will make a statement on rejections of the rescue package before the US markets open.

Congress will not sit today, in observance of the Jewish New Year Holiday.

However, behind the scenes, US Treasury officials are expected to lobby Congressional leaders in an attempt to rescue yesterday's failed bank bailout bill.

(BMcC)