ULSTER BANK and First Active have decided not to join the State's bank guarantee scheme, saying they are satisfied that the fresh injection of capital into their parent bank, Royal Bank of Scotland (RBS), provides sufficient protection and security to customers.
In a statement, Ulster Bank Group said that "following a detailed review of the options available to us, we are satisfied that the measures recently announced by the UK government, to ensure both the liquidity and recapitalisation of banks, provides our parent, RBS group, and consequently our retail and business customers in Ireland, with the protection and security they require during these unprecedented economic times".
The UK government has guaranteed its banks and their debts, and is backing a £20 billion (€24 billion) recapitalisation of RBS, which makes Britain's fifth largest bank one of the strongest capitalised banks in Europe.
Ulster Bank also acknowledged the success of the Irish scheme "in bringing stability to the Irish market".
"As one of the largest and longest established players in the Irish marketplace, Ulster Bank Group remains committed to working in partnership with the Irish Government and the financial regulator to ensure the stability of the Irish financial system and the continued availability of finance to our customers and the wider economy," the bank said.
Only Postbank, the savings bank jointly owned by An Post and French bank BNP Paribas, opted to join the scheme.
Halifax-Bank of Scotland (Ireland) and KBC Bank Ireland (formerly IIB Bank) decided not to join last week.
This means the State will not have to guarantee deposits and debts totalling €45 billion at the four foreign-owned Irish banks that have opted out of the scheme.
The State is covering €440 billion in deposits and debts at the six Irish-owned financial institutions.
It will also insure deposits of €150 million at Postbank.
A spokesman for the Department of Finance said the State would still be charging the covered institutions a total of €500 million a year for the two-year scheme, as the liabilities at the foreign-owned banks were considerably less than those of the covered Irish lenders.
Senior bankers had expressed concern that the scheme had initially stated that all covered banks would pay the State's costs if one bank defaulted on its debt and made a claim under the scheme.
The Government back-tracked on this initial position in a "market notice" published on the Department of Finance's website on October 22nd which said that a guaranteed bank would not have to indemnify the State against another bank defaulting on a debt.
This means that the taxpayer would foot the cost of the guarantee scheme if one bank defaults.
However, senior bank executives were still concerned that all banks would have to pay in the event of one institution collapsing.
The Department of Finance has said that there is "no cross indemnity" between institutions covered by the guarantee, though it says "there is a principle that any payments would be recouped from all the covered institutions, if the payments were not recouped from the particular covered institution".
"However, that is only one of a number of objectives, and in any event the principle is for recoupment in a manner consistent with the covered institutions' long-term viability and sustainability."
