Fitch criticises Irish reliance on ECB


Greek and Irish banks' reliance on European Central Bank loans is out of proportion to the size of their assets, Fitch Ratings agency said today.

Greek banks accounted for 6.6 per cent of the €749 billion the ECB lent to financial companies by the end of 2009, though only held 1.6 per cent of the euro-area's banking assets, Fitch analysts wrote in a report.

Irish lenders took 12 per cent of ECB funding, compared to a 5.24 per cent share of the region's bank assets.

"Greece, Ireland and, to a more limited extent, Spain and the Netherlands, have been more extensive users of ECB liquidity than in previous years," the report said. The increased use of ECB facilities "could indicate a reliance on these sources for structural funding needs or as a boost to flagging profitability".

Banks in Europe struggling under €434 billion of losses and writedowns from the deepest financial crisis in decades boosted their use of ECB financing. Lenders in the euro area borrowed the most in two months from the central bank May 9, while the amount of overnight deposits lodged at the ECB grew to €315 billion, the most since July, as banks remained reluctant to lend to each other.

German banks made up the largest users of ECB loans with 25.9 per cent, similar to their 23.9 per cent share of euro-area banking assets, according to Fitch. Spanish lenders' proportion of ECB lending was 10.9 percent, compared to an 11.1 per cent share of the region's assets.