Lenihan says bank guarantee scheme will be phased out from September

MINISTER FOR Finance Brian Lenihan has said the bank guarantee scheme will be phased out when it comes up for renewal at the end of September.

However, he said such phasing out would happen over time to reduce the possibility of a “cliff effect” if the guarantee was withdrawn suddenly.

Mr Lenihan told RTÉ Radio One's Marian Finucane Showon Saturday that guarantees of sums up to €100,000 were written into statute law and would continue.

Under the terms of the bank guarantee scheme which was agreed with six lending institutions on September 30th, 2008, the guarantee is for two years only.

Mr Lenihan said of sums greater than €100,000: “The rest of it will be reviewed, and a clear announcement will be made well in advance of September 30th in that regard.”

He said the plan in relation to interbank funding was already in place, where some sums are guaranteed beyond the two-year guarantee period.

“Banks have been obtaining funding on that basis,” he added.

He again defended the guarantee scheme, saying it was common practice in any crisis of bank funding to guarantee deposits as a first step to finding a solution.

He admitted that the months leading up to the introduction of the bank guarantee scheme were a “very scary and responsible place for me”.

He had to face numerous problems in the economy, not just in the banks but in the collapse of Government revenues and in the competitiveness of the economy.

The Minister said he was now half way through his treatment for pancreatic cancer, and was resting up more than usual, but was otherwise feeling fine. “My doctors have told me that I am able to do my job. The public are entitled to that reassurance,” he said.