MEMO/08/615

Brussels, 12^th October 2008

State aid: Commission welcomes revised Irish guarantee scheme

Following a series of constructive and positive exchanges, the Irish authorities have submitted to the European Commission a number of clarifications and modifications to the scheme governing the guarantee issued by the Irish Government for deposits and debt issued by credit institutions.

The European Commission has at all times sought to ensure, in cooperation with the Irish authorities, the achievement of the objective of stabilising financial markets in Ireland, while ensuring that there are no unnecessary distortions of competition with other banks and avoiding negative spillovers in other Member States, while minimising aid from public funds.

The scheme which has now been submitted by the Irish authorities addresses issues that had been raised by the Commission relating to the maintenance of the integrity of the single market in financial services and compliance with EU state aid principles, in particular as regards:

• non-discriminatory coverage of banks with systemic relevance to the Irish economy, regardless of origin;
• a pricing mechanism that covers the funding costs of the scheme and ensures a fair contribution over time by the beneficiary banks;
• appropriate safeguards against abuse of the scheme, including restrictions on commercial conduct and limits to balance-sheet growth;
• accompanying measures to address structural shortcomings of certain banks, in particular if the guarantee has to be called upon;
• safeguards on the use of guaranteed subordinated debt (lower tier-2 capital), in particular regarding the solvency ratios of the beneficiary banks;
• review at 6-monthly intervals of the continued necessity for the scheme, in the light of changes in financial market conditions.

The European Commission welcomes the various changes and commitments made and the close cooperation with the Irish authorities over the last week. The Commission will proceed urgently to the adoption of a decision on the Irish scheme in accordance with EU state aid rules.