Irish bank reliance on central banks falls

Irish-based banks’ reliance on European Central Bank money and emergency loans from Ireland’s Central Bank last month fell to its lowest level in more than two years.

The €116 billion in combined official funding to the banking system in November compares with €118.8 billion in October and is well down from the peak of €187 billion recorded in February 2011, data from the Central Bank showed yesterday.

Banks had €75.7 billion in outstanding loans from the ECB at the end of November, compared with €78.2 billion at the end of October. Irish banks’ emergency loans from the Central Bank were unchanged at €40.7 billion.

Despite the aggregate fall, the banks remain heavily reliant on ECB and Central Bank loans to fund their day-to-day operations. Weaning efforts have been delayed by the continued loss of cash deposits in 2012. Deposits are traditionally the main source of funding for banks, but from mid-2010 Irish banks suffered a severe outflow.

Partially off-setting that decline has been a limited regaining of access to the wholesale funding market.

Other Central Bank figures show that deposits held in resident credit institutions by Irish private households amounted to €87.2 billion at the end of September 2012, a quarterly increase of 0.4 per cent and an annual increase of 0.8 per cent.

Bank lending to households declined 3.4 per cent in the year to the end of September and by 0.7 per cent on the quarter to stand at €97 billion.

Including loans that have been moved off bank balance sheets, loans to private households outstanding at end of September 2012 amounted to €145.1 billion. Just as the stock of outstanding bank loans to households continued to fall, so too did loans to businesses.