Minister for Finance Michael Noonan has  announced the Eligible Liabilities Guarantees Scheme (ELG)  is to end.

The scheme will be closed on March 28th.

There had been growing expectations that the scheme, which was put in place in December 2009 to protect deposits in Irish covered banks, was set to be phased out, given the improving position of Irish banks.

"The Irish banking system failed the Irish people and the mismanagement of the banks and the crisis has cost the Irish taxpayer €62 billion," Mr Noonan said this afternoon. "All of the Government actions since taking office in March 2011, both at home and abroad, are designed to repair this damage and break the negative link between the banks and the State. We are making significant progress in this regard and the ending of the Guarantee for new liabilities marks another step forward."

The current scheme was set to run until June 30th, 2013, and late last year ratings agency Fitch warned that this would likely be the last extension.

Mr Noonan said the bank guarantee scheme had proved controversial.

"We feel the time is right and the banking system in Ireland is normal enough to proceed without the guarantee, " he said.

"The guarantee was a decision made in an emergency and we have moved out of the emergency ward now. We have moved back to normal conditions."

Mr Noonan said the banks would welcome the Government decision, taken at today's Cabinet meeting, because the guarantee was costing them money.

Mr Noonan said Fine Gael had voted for the guarantee because the then finance minister Brian Lenihan said the banks had a liquidity problem rather than a solvency problem.

He said that tied the party into voting for something it probably shouldn't have voted for.

However he stressed he did not want to criticise the late Mr Lenihan. He said decisions had to be taken quickly in the Department of Finance.

"I don't really want to look back," he said.

The ELG imposts a high cost on the banks, which include Bank of Ireland, AIB and Permanent TSB, as they must pay for protection of their depositors.

The scheme provides for an unconditional and irrevocable State guarantee for certain eligible liabilities (including deposits) of up to five years in maturity incurred by participating institutions from the date they joined the scheme until the closure of the scheme on certain terms and conditions.

It was introduced as a measure to maintain the stability of the financial system in the State and succeeded the government's blanket guarantee of September 30th, 2008.

It is separate to the Deposit Guarantee Scheme, which protects deposits of up to €100,000. The Central Bank said this scheme was unaffected by today's announcement.

The total amount guaranteed under the ELG scheme at September 30th, 2012 was €78 billion.

Between July 2011 and the end of January this year, State-guaranteed banks' deposits increased 10 per cent to €154.3 billion, the Department of Finance said earlier this month.

Their European Central Bank funding reliance fell about 30 per cent to €48 billion in the same period, it said.

Bank of Ireland and Allied Irish Banks withdrew their UK units from the ELG programme last year. Both banks said in November they are prepared for the expiry of the guarantee.

Labour TD Ciarán Lynch, who chairs the Oireachtas committee on finance and public expenditure, welcomed the ending of the scheme.

"This is a very significant and positive announcement and highlights the progress that this Government is making day to repair the damage caused by the banking crisis and the mismanagement of the economy by the previous Government," he said.

"We are slowly but surely dismantling the infrastructure of economic catastrophe that was put in place by the Fianna Fail, beginning with the Blanket Bank Guarantee in 2008 and ending when they sold out our economic sovereignty to the Troika in 2010."

Fianna Fáil finance spokesman Michael McGrath said the ending of the ELG scheme was "a necessary step towards normalising the banking system".

"In recent months, the Irish banks have managed to successfully raise funds outside of the guarantee scheme and deposit levels have stabilised. Since its introduction, the ELG scheme has played an important role in ensuring affordable access to funding for the banks and has yielded around €1 billion a year for the exchequer by way of fees from the participating banks."

Additional reporting: Reuters