Taoiseach Brian Cowen has warned that the government will not tolerate any abuse by the banks of its €400 billion deposit guarantee scheme to gain competitive advantage over other financial institutions.
Mr Cowen said that the action of Michael Fingleton Jnr, son of Irish Nationwide chief executive Michael Fingleton in sending an e-mail seeking deposits, citing the government's guarantee plan was "not acceptable behaviour".
The Taoiseach said he expected the financial regulator to take whatever action was necesssary to ensure that there was no repeat, after it emerged that Mr Fingleton Jnr said in his e-mail that "the building society now represented the safest place to deposit money in Europe".
"The whole purpose of providing the state guarantee was not to allow for predatory practice, it was to enable our institutions to go to international money markets and ensure they had the benefit of a state guarantee so they could get access to credit so therefore I think it's important people desist from such activities," said Mr Cowen.
Mr Cowen also sought to ease concerns from other governments that the move could lead to an inflow of funds into Irish institutions by saying that much of the money which has come back to Irish institutions this week was money which depositers had moved out earlier.
"I think as the governor of the central bank [John Hurley] pointed out today, in recent weeks we have seen large outflows of funds from Irish institutions and in order to bring an end to trends and in order to bring stability to the financial system, we made the decision we did early on Tuesday morning before the markets opened.
"The evidence would be that there is some money which had been in Irish institutions returning, having been there before so I think it's important not to get a wrong impression - what we are simply trying to do with this is a stabilisation of the financial system."
Mr Cowen said the details of what the Government would charge the banks for the guarantee was still being finalised by Minister for Finance Brian Lenihan, but he said that the system of charges would take account of "the commercial realities".
"What is involved here is the state acting as, if you, like a quasi insurance company and we will charge a premium for having the benefit of having the reputation of Ireland behind their application for funds internationally.
"That will take into account the commercial realities and that bank guarantee levy will be available for those who require funds on foot of our guarantee and in the event of not being called in and hopefully it won't, we will ensure that money goes to general taxation."
"And should there in the future be any financial institution that has to wind down its operations and I'm not contemplating that in any way, but if that were to arise, any deficit will funded not by the Irish taxpayer but by a further levy on the banking sector over time."
Mr Cowen stressed that the guarantee system was not just about supporting the Irish bank sector for its own sake but was a recognition of the need for a stable banking sector to help drive a thriving economy
"We need it because we want our jobs protected to the greatest extent possible. We want to keep investment flows coming to Ireland. We want to ensure we have stability and predictability so that international investors and businesses that have grown up indigenously can plan for the future.
"Once stability has returned to the market - and this effort during the week is the government and the oireachtas controbution to that - the banking sector will ensure that they provide lines of credit for those viable businesses that we have and those well costed plans that will be brought to them in the months and years ahead."
