THE Government last night battled for sweeping powers to allow it to step in and prevent troubled banks from going under.
Following a long day of drama, the full details finally emerged of Taoiseach Brian Cowen’s unprecedented €400bn guarantee to safeguard the country’s six banks. But the wide-ranging new laws go far beyond just guaranteeing loans.
New legislation to back up €400bn worth of loan guarantees for banks, introduced to the Dail late last night, gives Finance Minister Brian Lenihan the ability to step in “as he sees fit” to help out with financial support, including loans, guarantees, exchange of assets, and buying up shares.
In effect, the legislation stops just short of nationalising a bank, if the Government thinks it is necessary, as it allows for a stake to be bought up. It also provides for the overriding of competition laws if a merger of a bank is required, similar to a recent case in Britain.
The action taken by the Government in giving €400bn worth of guarantees to six of the main banks prompted a bounce back on the domestic financial market.
However, introducing the legislation to the Oireachtas were described as a “farce”, and the scale of the legislation sparked concerns on the opposition benches […] There was also little detail on the level of scrutiny involved or on the amount the banks had to pay to get their loans guaranteed.
Mr Lenihan said the move was “in no way a bailout for the Irish financial system”.
Fine Gael, Labour and Sinn Fein backed the passing of the law in principle, but wanted their concerns addressed in this morning’s debate.
Fine Gael said the specific powers it wanted in relation to regulation of banks was not dealt with.
Fine Gael finance spokesman Richard Bruton said the Government was seeking to play down the exposure of the taxpayer and the rules were being changed.
The Labour Party said it was alarmed by the lack of detail on how much the banks would have to contribute and wondered if deposits will flood towards Irish banks because of the added guarantees.
Labour finance spokesperson Joan Burton[…]
“This bill is an extraordinary blank cheque to the Minister for Finance, the Financial Regulator and the Central Bank to offer terms and conditions of support to banks,” she said.
Debate on the legislation will continue today in both the Dail and Seanad, due to the delays in the drafting of the bill. The bill passed the second stage of the legislative process in the Dail last night and will be completed today.
European Commission which last night said it would study the details of the guarantees to see whether they constituted illegal state aid.