The Government has increased the amount of money it guarantees in deposit accounts from €20,000 to €100,000 in a further effort to instil confidence in the State’s banks.
Minister for Finance Brian Lenihan announced the move at a press conference today making the Republic’s limit in such deposit protection schemes one of the highest in Europe.
The cover will apply to 100 per cent of each individual’s deposit and the guarantee level will also apply to credit union savers. Before today, the Government guaranteed up to €20,000 recently prompting some savers to spread large amount of savings over several banks.
Speculation had been mounting among consumers that Irish bank deposits are not secure, with some going so far as to withdraw their savings.
Announcing the decision today, Mr Lenihan said: "I want it to be known that the Government is confident about the strength and resilience of the Irish financial system.
"The Government is committed to the stability of our financial system, so that money placed with an Irish credit institution would not be at risk. As I said yesterday, the Irish Government wants to protect the whole financial system, secure its stability and ensure that all deposits in Irish banks are safe."
He said the Central Bank and Financial Regulator had stressed the "soundness and stability" of the Irish financial system. "This measure provides additional reassurance to depositors in Ireland that their savings are safe", he added.
He said the measure had been under consideration for some time. The Government's deposit protection scheme is designed to protect the savings of customers if a bank were to go bust. It is funded by a 0.2 per cent charge on deposits held in credit institutions. The new limit will require legislation but will be backdated to today.
Other countries guarantee deposits ranging from €25,000 in Finland and Portugal, €38,000 in the Netherlands, €40,300 in Denmark, €48,500 in the UK, while Italy guarantees up to €103,000.
Responding to the announcement Richard Bruton, Fine Gael's spokesman on finance said his party had recommended a similar move almost a year ago.
"Around the time of the Northern Rock banking crisis in the UK roughly one year ago I advised the Government to move to provide greater confidence for Irish depositors in line with our UK banking counterparts.
"I welcome the move today by the Minister for Finance to make just such a move and believe it will help calm some nerves to a jittery market. It is unfortunate however that the move was yet another reactive rather than proactive initiative from the Government," he said.
