Law to protect investors unveiled

MINISTER FOR Finance Brian Lenihan introduced promised legislation to protect investors in financial institutions. He said the Irish deposit protection scheme guaranteed to compensate depositors, subject to certain limits, when a credit institution failed.

“It covers deposits held in current accounts, demand deposit accounts and term deposit accounts with credit institutions,’’ said Mr Lenihan.

“The basic intention behind a deposit protection scheme is to reassure small and relatively unsophisticated depositors that there is a safety net that will enable them to recover all, or at least most, of their savings in the event of a failure of a credit institution.’’

That reassurance, he added, helped to reduce the likelihood of a run on an otherwise solvent bank, which helped to contribute to the stability of the financial system.

Introducing the Financial Services (Deposit Guarantee Scheme) Bill 2009, the Minister said it increased the statutory limit from €20,000 to €100,000 per eligible depositor with effect from September of last year. It also discontinued the co-insurance requirement whereby the depositor bore 10 per cent of the loss up to the statutory ceiling on cover which had a maximum payout of €20,000. Mr Lenihan added that it extended the guarantee scheme to apply to credit union savers.

Fine Gael finance spokesman Richard Bruton said while he did not oppose the legislation, the Dáil needed to be aware of its long-term cost. He said he was concerned about the Government’s purchase of all the impaired loans into which the banks entered at a cost of €90 billion.