Apr 24, 2009 - 5:31:05 PM
Irish Government guaranteeing liabilities of about €400 billion of 6 financial institutions; CSO says Irish credit institutions and moneymarket funds owed €818 billion overseas in June; National debt was €43 billion
By Finfacts Team
Sep 30, 2008 - 2:54:45 PM
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The Irish Government confirmed today that it was guaranteeing liabilities of about €400 billion of six financial institutions. The CSO reported today that the liabilities – mostly loans – of monetary financial institutions (i.e. credit institutions and moneymarket funds) amounted to €818 billion in June and the national debt was €43 billion.
Irish GDP is worth about €190 billion.
The Government has placed an unlimited two-year guarantee on all deposits and certain debt in six Irish banks in a move designed to “safeguard the Irish financial system”.
The six main Irish-owned financial institutions: AIB, Bank of Ireland, Anglo Irish Bank, Irish Life and Permanent (which owns Permanent TSB), EBS Building Society and Irish Nationwide.
It will also extend to subsidiaries of these banks but does not extend to deposits in National Irish Bank, ACC, Rabobank or Ulster Bank which are units of large international banks.
Two weeks ago, the Government raised the State guarantee limit on deposits to €100,000 from €20,000. The guarantee limit also covers international bank subsidiaries and Credit Unions.
The deal means the State will guarantee all the debts and deposits of the banks and building societies.
The deal is similar to an insurance policy where financial institutions will be charged for State cover. It is designed to improve the liquidity of the banks, which have suffered enormous falls in share prices.
The ISEQ is up 5.52% in Dublin, Tuesday afternoon. Anglo Irish has risen 62%; AIB 15%; BoI 22% and IL&P 26%.
Irish Share Prices
"I am satisfied that the decision of the Government yesterday evening is another element of the strategy of maintaining confidence in our banking sector . . . what we're talking about today is guaranteeing the actual liquidity of the Irish banking system, ensuring that there is access to funds on world markets," Finance Minister Brian Lenihan said today at a news conference in Dublin.
"Were liquidity to dry up in the Irish banking system in the weeks ahead, the inevitable result would be economic catastrophe for this country. We are a small exposed economy, one that is more globally exposed than any economy in any other member state in the EU. For us not to have a viable banking system would paralyse the trade of this country and reduce us to a powerless position in all the markets in which we buy and sell our goods and services," he added.
Commenting on the Government announcement, IBEC Director General Turlough O’Sullivan said: "IBEC strongly supports the Government in this decisive move to safeguard the Irish banking system. It helps remove the uncertainty of recent times and sends a very positive message to the domestic and international business community.
"The banking sector is vital to the effective functioning of business and the economy generally, and the measures announced today should have a positive impact on the ability of businesses to acquire finance and continue normal investment activities. Government has shown sound leadership in the manner in which it has addressed this challenging situation."
Liam Shanahan, President of the Irish Exporters Association said: “This early action by the Government at this critical moment for Irish banking will in my view provide an effective guarantee to our depositor base and stabilise the whole trading system”.
He went on to say; “In an open economy with full exposure to international banking transactions and dependent on exports for future economic growth, there was an over-riding and immediate danger averted by this swift and decisive action of the Government”
Department of Finance Statement
Ireland’s External Debt reaches €1.61 trillion at end-June
At 30 June 2008, the gross external debt of all resident sectors (i.e. general government, the monetary authority, financial and non-financial corporations and households) amounted to €1,611bn. This represents an increase of €51bn on the level shown at the end of the previous quarter and reflects a continuing upward trend in the level of external debt liabilities over the eight quarters shown. The CSO says it should be noted, however, that much of this external debt is offset by holdings of foreign financial assets by Irish residents. Other points of note in the end-June 2008 results are:
The liabilities – mostly loans – of monetary financial institutions (i.e. credit institutions and moneymarket funds) amounted to €818bn. This was €5bn up on the end-March stock level and represents 51% of the total debt, a smaller share than at end-March.
The liabilities of other sectors increased by €27bn from the end-March position and at €562bn represented 35% of the overall debt for the end-June quarter, a larger share than in the previous quarter. The bulk of the increase was accounted for by issues of long-term debt securities.
Direct investment debt liabilities of €183bn showed an increase of €5bn from the level shown for end March.
General government liabilities increased by €9bn to €43bn in the quarter. The increase was largely due to a new long-term Government stock issue.