Analysis: As the global financial crisis deepened this week, worried savers were said to be transferring significant amounts of money from British banking institutions to accounts based across the Irish Sea.

As the global financial crisis deepened this week, worried savers were said to be transferring significant amounts of money from British banking institutions to accounts based across the Irish Sea.

At the same time, pressure is growing on the UK Government to introduce stronger safeguards for account holders.

But serious questions are being asked of the Irish Government's pledge to protect all deposits held at its major banks for the next two years.

It has been suggested that this amounts to "state aid" of its banking sector - giving it a direct advantage over those institutions which do not benefit from the added security.

David Flint, expert in EU competition law at Scots law firm MacRoberts, said that the rules governing competition could well be undermined by the move taken by Ireland, which is due to be ratified this morning.

But he added that the extraordinary climate could allow the Irish Government to safely justify its actions.

Mr Flint said: "There is the ability in severe emergencies to override the rules. There is an argument that it is a state aid issue but what would happen is that the Commission would allow emergency state aid to be given then look at the situation again when the crisis is over and decide if the response is disproportionate or not."

He added: "At the moment, you could not say that there were any banks in Europe which are not getting a degree of assistance.

"At present, I don't think a challenge (to the Irish Government guarantee) would be successful. If it applied to only Irish people but not to Scots living in Dublin, for example, it would be a different matter."

The banks covered by the guarantee are Allied Irish Bank, Bank of Ireland, Anglo Irish Bank, Irish Life and Permanent, Irish Nationwide Building Society and the Educational Building Society. Some have branches in Scotland, but are concerned with more corporate business in the UK, rather than day-to-day high-street accounts.

The guarantee to these banks by the Irish Government will be subject to terms and conditions, holding the detail on the level of "state aid" provided by the government.

The EU has already intervened in the major levels of assistance given to two UK financial institutions, backing both nationalisation programmes of Northern Rock and Bradford & Bingley, but what stands out with the Irish Government pledge is the scale of the proposals, effectively underwriting a sum twice the country's GDP.

Gordon Downie, head of competition and regulation at Wedderburn and Shepherd, said: "The number of banks to be subjected to these sort of measures in this space of time is pretty unprecedented, but the European Commission has been seen to be committed to applying the rules in a sensitive manner at the moment. The Commission needs to be sensitive to the crisis."

Mr Downie agreed that the commission would be most interested in how the emergency measures would be dismantled in the future.

"What the commission will do is hold back until the crisis has passed. It will be particularly interested in seeing how any of these conditions are unwound," he said.

Professor Gabriel Talmain, who holds the Daniel Jack Chair of Political Economy at the University of Glasgow and is also director of the Centre for Economics and Financial Studies, said: "These are extraordinary times but I am sure (the Irish Government) do not expect that the pledge will be taken up in full. There is an element of risk, but I think it is a risk worth taking."