ANALYSIS:The creation of an uneven playing field is the banks' gripe about the Government plan
THE GOVERNMENT guarantee to safeguard the future of the Irish banking system has won many fans, but when it comes to the stadium of Irish banking, the supporters are definitely not in the away end.
Senior bankers in the foreign-owned Irish banks, in particular Ulster Bank Group, which owns First Active, and Bank of Scotland (Ireland) (BOSI), which owns retail bank Halifax, argue that by being excluded from the guarantee to protect the six Irish-owned banks and building societies, the Government is leaving out one in five Irish bank customers - their customers.
Their respective multinational parent banks, RBS and Lloyds TSB, joined their Irish bank lieutenants yesterday in a vigorous lobbying campaign of Taoiseach Brian Cowen and Minister for Finance Brian Lenihan to be included under the guarantee. Ulster Bank and HBOS were also heavily lobbying department officials, the Financial Regulator and the Central Bank to have the State-cover extended.
Danish-owned National Irish Bank and Belgian-owned IIB Bank, both significant players in the Irish banking market, also expressed concerns about being excluded from the guarantee, even though each of their deposits are covered up to €100,000 under the existing protection scheme.
The Government also came under intense pressure from other British banks and the UK financial regulator, while representatives of EU competition commissioner Neelie Kroes canvassed the opinions of Ulster Bank and BOSI, and senior executives in their parent banks, on the implications for competition. The creation of an uneven playing field is the banks' gripe about the plan.
Lenihan said on Tuesday he regretted that the scheme was setting "a dangerous tendency" towards "economic nationalism" but that he had been forced to act in the interests of the Irish people.
He did not accept that foreign-owned Irish banks were left exposed. But they clearly feel they are, judging by their intense opposition to the guarantee.
The Department of Finance succumbed to the pressure somewhat last night when it said that it would consider any applications from "financial subsidiaries with a significant high street retail presence" who wanted to join the guarantee.
This could lead to a door being opened to Ulster, BOSI, NIB, IIB Bank and Dutch-owned ACC, but would exclude foreign-owned subsidiaries in the IFSC.
BOSI has applied to join the scheme, while Ulster Bank intends to, saying optimistically last night that it expected any application "to be successful".
However, the department was saying last night that there were no concrete plans to include foreign-owned banks with retail branches in Ireland. Further intensive lobbying may yet force the Government's hand.
Ulster Bank and BOSI are right to be upset at being excluded from the Government guarantee. Despite being owned by large multinational banks, they are substantially self-funded. Ulster Bank has Irish deposits of €29 billion which helps fund its €64 billion loan book. BOSI's €32 billion loan book is funded by deposits of €8 billion.
One senior banker said the foreign-owned Irish banks were suffering from "the law of unintended consequences" as he felt the Government didn't mean to cause problems for the banks by guaranteeing the six Irish-owned banks and building societies.
Those institutions are enjoying the benefits of the guarantee. For them, the scheme is working, but the terms and conditions still have to be ironed out clearly.
Irish Life Permanent chief executive Denis Casey said the Irish-owned banks could borrow more cheaply with the guarantee, which had opened up the "oxygen supply" of funding again.
The Irish-owned lenders have embraced their newly crowned status as State-guaranteed institutions in a bid to attract new deposits and reports say deposits are flooding in. One Irish bank is understood to have received a single corporate deposit of €500 million on Tuesday following the announcement of the guarantee.
The British media reported that four of the six-guaranteed Irish financial institutions have branches or businesses in the UK and at least two were publicly keen to welcome new depositors.
In one dispatch, on the BBC's website, Irish Nationwide chief executive Michael Fingleton was reported to be cheerful, saying that the building society would be "very happy to accept deposits" and would prefer "the average man's deposit rather than very large ones, which are very volatile".
In these cash-starved times, Irish banks and building societies will be eager to see new lodgement slips being filled out.
