The ECB is unhappy that the guarantee continues to cover interbank deposits:
The extension of a guarantee to cover interbank deposits should be avoided as this could entail a substantial distortion in the various national segments of the euro area money market by potentially increasing short-term debt issuance activity across Member States and impairing the implementation of the single monetary policy, which is a unique competence of the Eurosystem under Article 105(2) of the Treaty.
They also appear to be unhappy that the guarantee does not have a minimum maturity:
In the same vein, the ECB’s recommendations on government guarantees state that ‘Government guarantees on shortterm bank debt with maturity of three to 12 months could be provided so as to help revitalise the short-term bank debt market.’ Moreover, it is noticeable that under the draft scheme there is no stated minimum maturity for any guaranteed liabilities which means that liabilities with a maturity of less than three months may be guaranteed in practice.
The ECB’s concerns about national guarantees interfering with the normal operations of interbank money markets are not restricted to Ireland. Here’s a similar opinion offered on an Austrian extension of interbank guarantees.
The ECB also notes about the Irish guaratee scheme that
for the sake of transparency, a more precise indication should be given on the method to be used to calculate the fees.
These opinions are consistent with various earlier warnings from the ECB Executive Board members about their plans to remove their exceptional extension of credit and to return to their normal operational framework. Unfortunately, we are now being repeatedly reminded that those who told us that the ECB would be lending €54 billion to Irish banks were not at all accurate.