The European Commission has approved an Irish scheme aimed at ensuring that depositors are protected from any future banking crisis that might affect depositors' funds.
The scheme, when it enters into force, will provide guarantees on deposits and debt to eligible banks active in Ireland.
In its findings the Commission found the revised scheme, originally approved on October 13, 2008, to be in line with its Guidance Communication on state aid, drafted to overcome the financial crisis.
In particular the scheme was deemed appropriate as the measure is limited in time and scope. The Commission therefore concluded that the measure is an adequate means to remedy a serious disturbance of the Irish economy, and as such is in line with Article 87.3.b of the EC Treaty.
Competition Commissioner, Neelie Kroes said: "The new guarantee scheme will give credit institutions in Ireland access to medium-term state-guaranteed financing and provide Ireland with an effective means of restoring confidence in the financial markets, while at the same time limiting distortions of competition."
Prior to the scheme's approval, Ireland notified the Commission that it had drafted a revised guarantee scheme, with the aim of further stabilizing financial markets by ensuring financial institutions' access to financing.
The revised scheme introduced several modifications. Firstly, the material scope of the scheme was changed. The new guarantee excludes subordinated debt and extends to instruments with a maturity of up to five years. Previously, liabilities were covered until September 29, 2010.
Secondly, the scope of the scheme was modified and the instruments guaranteed under the scheme may be issued from December 1, 2009 until June 1, 2010.
Finally, the new scheme aligns the guarantee fee to the remuneration structure set out in the Commission Guidance Communication on state aid to overcome the financial crisis.
All other conditions, eligible institutions and behavioural constraints remain as laid down in the original decision.
A comprehensive report in our Intelligence Report series giving a country-by-country analysis of offshore investment funds, stock exchanges and trusts, with an analysis of the US QI regime, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report9.asp
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