Irish lenders' reliance on ECB funding rises

Sat, Dec 31, 2011, 00:00

IRISH CREDIT institutions’ reliance on the European Central Bank (ECB) for funding increased again in November, according to official figures released yesterday.

The Irish Central Bank said in a monthly statistics bulletin that overall, Irish banks and other lenders increased their borrowings from the ECB by €3 billion to €104 billion in November.

Of this, the Central Bank said that domestic credit institutions, which lend mainly to Irish consumers, accounted for €73 billion of the total.

They increased their borrowing from the ECB by €1.6 billion during November.

Irish banks have been forced to turn to the ECB for liquidity since the crisis struck the Republic’s financial system in late 2008.

Previous to this, the Irish banks raised the cash they needed to give credit to customers on international money markets.

The Central Bank’s figures also show that the level of deposits from outside the euro-zone fell sharply during November.

The bank said that deposits in Irish banks from non-euro area residents fell by €5.8 billion to €155.8 billion during the month.

The Central Bank said that there were a number of reasons for this, including movements in currency valuation. “Private sector deposits from non-euro area residents fell by €2.5 billion, all of which relates to IFSC-based banks,” the Central Bank said.

“There was also a fall of €3.2 billion in total deposits by non-euro area residents with the covered institutions. This is all explained by inter-affiliate transactions and valuation effects.”

Conversely, its statement added that the amount of deposits from non-residents living within the euro area increased by €1.6 billion during November.

Loans to consumers fell during the month, the figures show. “Household lending declined during the month by €363 million, based on underlying transactions, following a net monthly flow of minus €617 million in October,” the Central Bank said.

“Developments in November were largely driven by a decline of €221 million in loans for house purchase, while loans for consumption and other purposes fell by €142 million and €1 million, respectively,” it added.

The figures show that the total value of mortgages in the Republic in November stood at €110.8 billion, down from €111 billion the previous month.

Business lending also fell by 1.7 per cent during November on year-on-year basis. However, the amount of business loans given out by the banks increased by €39 million during November. This followed a fall of €450 million during the previous month.

Short-term lending, including overdrafts, to businesses increased by €389 million in November. This followed a rise of €134 million in October.

Earlier this month, more than 500 banks across Europe borrowed €489 billion from the ECB exercise designed to inject cash into the EU’s faltering financial system and ease the euro zone debt crisis. Irish banks were thought to have joined their European counterparts to bid for a share of the money when the ECB was auctioning the loans, although the actual figure is not known.