The State has reduced its exposure under the Eligible Liabilities Guarantee (ELG) scheme from €375 billion in 2008 to €87 billion in July 2012, according to a note published by the Department of Finance today.
The ELG scheme covers deposits of more than €100,000, while the Government’s deposit protection scheme covers deposits under that amount.
Some €110.6 billion of bank liabilities were covered under ELG at the end of March 2011. Some €87 billion of bank liabilities are currently covered under ELG.
The government introduced the ELG scheme in December 2009 to enable the six Irish lenders to raise longer-term funding beyond the expiry of the original two-year blanket guarantee in September 2010.
The ELG scheme has been extended three times since it was introduced as a result of the Irish banks being shut out of the international debt markets.
ELG fees are on average about five times more costly than the original blanket guarantee. AIB paid ELG-related charges of €306 million in 2010, while Bank of Ireland paid €275 million, Irish Life and Permanent €97 million, EBS building society €34.6 million and Irish Nationwide €11.7 million.
Under the EU/IMF programme, an inter-agency working group led by the Department of Finance will, by end-2012, develop a roadmap for weaning the banking system off the Scheme while preserving financial stability and respecting fiscal targets.
