UPDATE: Irish PM: Bk Guarantee Can't Be Finalized Without EU

(Adds detail.)

DUBLIN (Dow Jones)--Ireland's EUR400 billion-plus bank guarantee scheme can't be finalized without the approval of the European Union, but Irish Prime Minister Brian Cowen plans to have a draft of the proposal ready later in the week, the PM said Wednesday.

However, the finished proposal won't be ready to be put before the parliament until Oct. 15 or Oct. 16, when the parliament will also be debating the government's 2009 budget, which will be unveiled Oct. 14.

Cowen told the Irish parliament that "contacts are ongoing" with the financial regulator, the central bank of Ireland, and the E.U.

"Issues are currently being factored into the draft of the scheme," he said.

Cowen said these issues include how the scheme covers deposits in subsidiaries of foreign-owned financial institutions based in Ireland, and other competition concerns raised by the E.U. Competition Commissioner Neelie Kroes.

Cowen said every care was being taken to address the E.U.'s concerns in an appropriate manner and would finalize the guarantee scheme "as quickly as possible" in order to help bring stability the banking crisis here.

Ireland's two-year guarantee safeguards deposits, covered bonds, senior debt and dated subordinated debt of over EUR400 billion for six institutions, and is sympathetic to applications from units of foreign-based banks in Ireland.

NCB Stockbrokers says consolidation looks "inevitable" for Irish banks. "It seems certain that the government will use the powers provided by the [bank guarantee] bill to orchestrate consolidation among the six banks whose deposits are guaranteed," NCB says.

The bill 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, Irish Nationwide and the Educational Building Society.

At 1300 GMT, shares in Ireland's banks were still weak along with European markets due to the bank's rate cut. AIB were down 11% at EUR4.95, Anglo Irish Bank fell 14.3% at EUR2.30, BoI fell 3.9% at EUR3.16 and IL&P were down 14.8% at EUR3.24.

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

(END) Dow Jones Newswires

October 08, 2008 09:04 ET (13:04 GMT)


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