Page last updated at 15:35 GMT, Tuesday, 30 September 2008 16:35 UK

A guarantee to remove uncertainty

Man walking past Bank of Ireland in Dublin, pic AP
The guarantee also covers bank of Ireland branches in the UK

The Irish government's promise to guarantee all deposits in six Irish banks and building societies will also cover branch customers in Northern Ireland.

Consumer Correspondent Martin Cassidy explains what it means.

It's very difficult to find any guarantees in the current climate, but at least there's some relief for people who have money in Irish banks.

And the guarantee covers Bank of Ireland branches in Northern Ireland. So if you have money on account with the bank, the Irish government is guaranteeing all deposits and borrowings.

The total amount could run to 400 billion euro.

This is in addition to the guarantee for deposits of up to 100,000 euro announced by the Dublin government recently.

The Department of Finance in Dublin said the step was being taken to remove any uncertainty surrounding banks.

The move followed a day of record losses on the Irish stock market which saw Anglo Irish Bank down 46%. That share price has recovered strongly on Tuesday.

But what of the other main banks in Northern Ireland, are they too covered by the Irish Government guarantee?

Well First Trust Bank of course is owned by Allied Irish Bank.

But it's still not clear whether the guarantee will extend to Northern Ireland branches.

The Department of Finance in Dublin though has confirmed that discussions are continuing on this issue.

Then there is the Northern Bank which is owned by the Copenhagen-based Danske Bank.

The Northern has confirmed that the Irish government guarantee does not apply in its case, but the bank is emphasising that it remains in a strong financial position with sound funding underpinning its business.

Ulster Bank falls outside the Irish government guarantee scheme but it too has strong financial backing from its owners Royal Bank of Scotland.

The question now is whether the Irish government guarantee will distort trade by encouraging some depositors to move their cash to banks benefiting from its scheme.

At least one market commentator has said it puts British banks at a massive competitive disadvantage.

"There is a widespread perception that the 35,000 limit to deposit protection in the UK is inadequate - and that it makes our banks more at risk of a run on retail deposits," said the BBC's Robert Peston.

Nowhere more than in Northern Ireland is that risk now apparent.

Irish government guarantees banks
30 Sep 08 |  Northern Ireland

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