Lending to companies and households continued to decline in the year ending December 2009, new figures from the Central Bank show.
Headline private sector credit (PSC) fell 6 per cent over the year, with write-downs of loans and bad debt provisions accounting for almost two-thirds of the decline. Excluding valuation effects, credit fell 2.1 per cent on an annual basis in December.
Lending to businesses fell 3.2 per cent over 2009, while residential mortgages outstanding were 0.3 per cent lower at the end of 2009 than in the same period in 2008.
PSC fell almost €1.2 billion in December, a decline of 0.3 per cent compared with the same month a year earlier. This followed falls of €2.3 billion and €2.5 billion in October and November respectively.
"The headline month-on-month PSC decline in December was mostly due to underlying transactions as repayments were higher than draw-downs during the month.
“This was in contrast to most months in 2009, where valuation effects rather than underlying transaction, had dominated month-on-month changes through most of the year," the Central Bank said in a statement.
Household credit was down 1.5 per cent on an annual basis in December 2009 compared with 2008. Credit card debt fell 0.7 per cent in the month, with total repayments lower than new spending during December.
Residential mortgage lending outstanding fell by €19 million during December, while the annual rate of change in mortgage lending fell to -0.3 per cent.
At the end of December, outstanding mortgages totalled €147.7 billion.
Lending to companies continued a downward trend. Excluding valuation effects, the annual rate of change in non-financial corporation (NFC) credit fell to -3.2 per cent in December. In October, NFC credit fell 2.2 per cent, while November recorded a 2.7 per cent decline.
The Central Bank said Ireland's banks accounted for €198.4 billion of the euro area's broad money supply, known as M3, in December. M3 fell 2.1 per cent in December on an annual basis.
"In aggregate, M3 deposits decreased by €841 million over the month, as the decline in deposits with agreed maturity up to two years continued to be greater than the increases in shorter term and overnight deposits," the bank said.
"The value of debt securities up to two years maturity issued by Irish credit institutions in December declined by €279 million, while there was an increase of €2.3 billion in holdings of debt securities issued by euro-area MFIs, which are netted out of the money supply contribution. The combined impact of these two developments was the main factor in a decline of €3.8 billion in Ireland’s contribution to euro area M3-M2."
