GOVERNMENT GUARANTEE:THE GOVERNMENT'S emergency legislation to safeguard Irish banks includes powers to take shares in troubled institutions, it has emerged.
The legislation, presented to the Oireachtas late last night, commits the Government to maintaining stability in the State's financial system.
Under its terms, the Government will be able to "subscribe for, take an allotment of, or purchase shares and any other securities" in institutions.
Last night, the Department of Finance acknowledged that the shares plan had not been mentioned in yesterday morning's dramatic announcement.
However, a spokesman said it meant that financial institutions could offer shares, instead of cash, to pay for having their liabilities underwritten by the State.
The emergency legislation dominated yesterday's meeting of the Cabinet, but changes were still being made to the text up to late last night.
Shortly before 9pm, Minister for Finance Brian Lenihan was involved in rushed talks with the Opposition party whips after a drafting flaw was discovered.
Mr Lenihan will have powers to approve emergency mergers even "if they substantially lessen competition", if that is necessary to protect the banking system.
Though the Government has said the legislation is only intended to cover Irish-owned banks, it does not specifically exclude any others operating in the Republic.
Mr Lenihan, under the legislation, must consult "with any other Minister" he considers appropriate. The Minister for Finance will be able to provide support for "borrowings, liabilities and obligations" for two years up to September 29th, 2010.
All supports "shall so far as possible ultimately be recouped from the credit institution or subsidiary to which the support was provided".
The Minister for Finance may "include conditions regulating the commercial conduct of the credit institution", and may include conditions "to regulate the competitive behaviour of that credit institution".
Banks and other institutions taking up the Government's underwriting offer will be required to follow all rules laid down by the Central Bank.
The Minister for Finance will also have powers "from time to time to review the necessity for the financial support".
Mr Lenihan will be required to produce an annual report on the operation of the emergency programme to both Houses of the Oireachtas. The report will outline the aggregate sums of money outstanding at the end of the year, and the sums that have been repaid by the institutions.
He will have powers to withdraw any support previously offered to an institution "in accordance with the terms and conditions of the financial support".
The Minister will be able, subject to consultation with the Central Bank and the Financial Regulator, to approve mergers of banks, if that is necessary, if he "is of the opinion that the proposed merger or acquisition is necessary to maintain the stability of the financial system in the State and there would be a serious threat to the stability of that system if the merger or acquisition did not proceed".
Such mergers would have to be notified to the Minister "and not to the Competition Authority", and will not come into effect until approved by the Minister.
If such a merger proposal is made, the Minister will consult "urgently" with the Minister for Enterprise, Trade and Employment, the Central Bank and the Competition Authority.
The Governor of the Central Bank and the Competition Authority will "provide any advice, information and assistance that the Minister reasonably requires".
The Minister "shall" approve a merger proposal if, in his opinion, the merger would not "substantially lessen" competition in Irish banking. However, the Minister will have powers to approve mergers in emergency situations even if they do "substantially lessen competition".
Such circumstances will arise if the stability of the State's financial system is at risk, if there is a need to avoid a serious threat to the stability of credit institutions and if there arises a need to "remedy a serious disturbance" in the economy of the State.
The legislation can be annulled if the Government places a resolution before the Houses of the Oireachtas "but without prejudice to the validity of anything previously done under that scheme".
