Central Bank governor Patrick Honohan said today he saw no risk that the European Central Bank would stop providing large volumes of short-term funding to Irish banks.
Mr Honohan, who is also a member of the ECB's governing council, warned that stress tests underway on Irish banks would likely uncover larger losses than currently acknowledged due to ongoing weakness in the Irish economy.
The banks have been dependent on funding from the ECB and the Central Bank after suffering deposit outflows, and have been frozen out of interbank lending markets due to concerns about their future.
Irish banks owed the €116.9 billion in short-term funding at the end of February. They owed a further €70 billion to the Irish Central Bank in special funding.
"The direct lending by the Central Bank of Ireland is of course carried out with the prior knowledge and approval of the ECB: The suggestion sometimes heard, that the ECB might be about to cut off the Irish banks, is very wide of the mark," Mr Honohan said in a lecture in Geneva.
Mr Honohan also warned that a round of stress tests underway would likely uncover larger losses by Irish banks that currently acknowledged.
"To be sure the somewhat weaker economic growth projections now available would imply some increase in expected losses," Mr Honohan said.