UPDATE: Irish Fin Min: EU Meeting On Guarantee "Constructive"

(Updates with further details.)

DUBLIN -(Dow Jones)- The meeting between Irish Finance Minister Brian Lenihan and European Union Competition Commissioner Neelie Kroes was "constructive" in clarifying its guarantee for banks, Ireland's Department of Finance said Tuesday.

"The meeting was constructive and important in clarifying Irish intentions in relation to the implementing measures to be introduced shortly under the terms of the legislation," the department said in a statement.

"The Commissioner raised concerns regarding possible market discrimination between different banks operating in Ireland and the minister confirmed that he is addressing the issues arising in that regard," the statement added.

They also agreed that steps would be taken to guard against undue distortions in financial flows and Lenihan said these concerns would be addressed using behavioral controls and quantitative balance sheet controls.

A spokesman for Lenihan said there were no plans to significantly alter the two-year guarantee, safeguarding deposits, covered bonds, senior debt and dated subordinated debt of over EUR400 billion for six institutions.

It covers the four main publicly quoted banks: Allied Irish Banks PLC (AIB), Bank of Ireland PLC (IRE), Irish Life & Permanent PLC (IPM.DB) and Anglo Irish Bank PLC (ANGL.DB), and two of Ireland's biggest building societies.

The Irish cabinet is scheduled to meet at 1800 GMT Tuesday to put the finishing touches to the government's two-year bank guarantee scheme before presenting it to parliament later in the week.

The government will decide whether deposits in subsidiaries of Irish banks overseas are guaranteed and how much it will charge banks as a levy for the guarantee. Market speculation puts that figure at EUR500 million or more.

NCB Stockbrokers said a similar guarantee in Denmark could hit Danish bank profits by 20%. "The Irish government may feel it needs to take an equally hard line for charging their banks for the protection they're receiving," it said.

Earlier Tuesday, Lenihan told state broadcaster RTE Radio of the E.U. and other member states' competition concerns: "I undertook to address and examine their concerns" and said he was confident of an agreement.

He also criticized bank incentives and excessive remuneration for bank employees. "One of the reasons we had a banking crisis was that executives involved in irresponsible lending were being promoted," he said.

-By Quentin Fottrell, Dow Jones Newswires; +353-1-676- 2189; quentin.fottrell@dowjones.com

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October 07, 2008 06:19 ET (10:19 GMT)


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