More than 350 banks and credit unions in Ireland will between them be charged €85 million next year by the Central Bank of Ireland as the regulator begins building a fund to meet the costs of guaranteeing deposits up to a ceiling of €100,000 in line with an EU directive.
This has emerged from a written answer supplied by the Minister for Finance, Michael Noonan, to a question from Fianna Fáil’s finance spokesman, Michael McGrath.
To date, a deposit protection account has been operated by the Central Bank to fund any failure of a credit institution that could trigger the State’s guarantee. Ringfenced Some €396 million of deposits has essentially been ringfenced by the Central Bank in the event of a failure, although this money remains on the balance sheets of the various financial institutions.
Under the new EU regulations, a deposit contributory fund must now be established. This requires annual contributions to a new fund up to a level of 0.8 per cent of covered deposits for all credit institutions authorised in the State by July 3rd, 2024.
In the Republic’s’s case, that equates to a figure of €680 million and will mean a combined annual contribution by institutions of about €85 million a year.
It is understood that the Central Bank will begin levying this charge from next year.
To bridge the transition from one fund to another, the Government has introduced a “legacy” fund. Legacy fund According to Mr Noonan, this will involve the Central Bank transferring 0.2 per cent of covered deposits, or €180 million, from the deposit protection account to the new legacy fund. This is to provide a “backstop to the deposit contributory fund in the early years while it is being built up,” he added.
“The reason the level of 0.2 per cent of covered deposits was chosen is that it will ensure that all credit institutions will contribute proportionately the same amount to the legacy fund, and therefore to a DGS [deposit guarantee scheme] pay-out should the contributory fund have insufficient resources during the three-year operational period of the legacy fund,” Mr Noonan said.
