OTHER LENDERS:THE GOVERNMENT looks set to guarantee foreign-owned Irish banks, including Ulster Bank Group, after succumbing to mounting pressure from banks with large Irish branch networks that had not been included in the State's bank guarantee scheme.
The Department of Finance said Minister Brian Lenihan has indicated that he would consider - "on a case-by-case basis" any applications "from financial subsidiaries with a significant high street retail presence" in Ireland looking to be covered by the guarantee scheme.
The Minister told the Dáil last night that he would give "careful and sympathetic" consideration to any application from Ulster Bank to be included. Pressure mounted on the Government to extend the guarantee to foreign-owned Irish banks, including Ulster Bank and Bank of Scotland (Ireland) (BOSI), which owns retail bank Halifax.
Following meetings between the chief executives of a number of foreign-owned banks and Mr Lenihan yesterday, the Department of Finance said it would consider including these institutions under the guarantee scheme, which protects the six Irish-owned banks and building societies.
Ulster Bank said the bank and its subsidiar First Active intended to apply to be covered.
"Any application is expected to be successful," the bank said.
BOSI applied to be covered by the guarantee on Tuesday, shortly after the scheme was announced.
Ulster Bank Group, including First Active's business, is the second-largest mortgage lender in the country after Irish Life Permanent, which has been covered by the State guarantee.
Ulster Bank and BOSI - and their respective UK parent banks, RBS and Lloyds TSB-HBOS - lobbied the Government to have the guarantee extended to cover the two banks. Officials representing EU competition commissioner Neelie Kroes were also in contact with senior executives at the two banks, in Ireland and the UK, seeking their assessment of the effect of the State guarantee on competition in Irish banking.
The UK banking regulator was in contact with the Irish Financial Services Regulatory Authority in Dublin, raising concerns about the State guarantee.
UK banks are seeking talks with the Government about the scheme, saying it distorts competition. The guarantee also covers subsidiaries of the Irish-owned banks and building societies.
The guarantee has attracted large deposits to the six guaranteed Irish-owned lenders - AIB, Bank of Ireland, Anglo Irish Bank, Irish Life Permanent, Irish Nationwide and EBS.
"The guarantee has clear consequences for firms competing to win retail deposits," the British Bankers' Association said.
"While we support proposals aimed at reintroducing stability to the financial markets, we need fair play for financial institutions across Europe."
The association said that banks, particularly in Northern Ireland, would be hurt by the plan.
Danish-owned National Irish Bank and Belgian-owned IIB Bank, Ireland's fifth-largest mortgage lender, have also raised concerns about being excluded from the guarantee.
