THE MINISTER for Finance Brian Lenihan has said the withdrawal of Bank of Scotland (Ireland) (BoSI) from the Irish market reflected the fact that there had been too much lending during the Celtic Tiger years.
Mr Lenihan said that many foreign banks had participated in this “frenzy”.
“Thankfully, the [Irish] taxpayer does not have to pay the cost of their mistakes. Other governments in other countries will have to carry those losses,” he said.
Mr Lenihan indicated he was not overly concerned about the implications that the closing of BoSI’s Irish operations would have for lending or competition.
He said that both Bank of Ireland and AIB had committed to providing €12 billion in additional lending over the next two years.
“That’s why the Government has put credit review arrangements in place so that anyone who makes a written application to the two large banks can have those applications considered, on appeal if necessary,” he said.
The Minister, in an interview with RTÉ, also confirmed elements of the bank guarantee scheme would not be extended from September but did not specify them. Asked if the guarantee scheme would be extended quarter-by-quarter, or for a year, when it expires at the end of September he said any solution would reflect the degree of turbulence in the European banking system.
“Personally, as far as Irish banks are concerned, we want to see them [taking themselves] off the guarantee as soon as possible.
“Elements of the guarantee will not be continued after September. And what we are talking about is the phasing out of the guarantee over time,” he said.
He pointed out that guarantees were also in place in 16 European countries. He also said that personal demand deposits in Ireland are already guaranteed until the end of 2010.
“The Government itself is examining the case made by individual institutions here. We will evaluate them. We will raise the concerns with the commission in Brussels and we will await their response,” he said.
Mr Lenihan said the biggest difficulty facing the Government related to public finances and not the resolution of the banking crisis.
“The total cost of the rescue of the Irish banking system over a 10-year period is not in excess of the total costs of financing the State in any one year.
“We have to face up to the fact that in our budget this year, we continue to have a very large gap between what we spend and what we get in in taxation.”
He said it was clear world markets were not very concerned abut the costs of borrowing for the bank rescue, as evidenced by the “huge demand this week for Irish bonds”.
