Irish private sector credit outstanding declined 1.2 percent, or by €4.7 billion, in the second quarter from the first quarter, the Central Bank said.
This was mainly due to write-downs of existing credit arrangements and increased provisions for bad and doubtful debts, the report said.
Credit outstanding fell 1.3 per cent compared with the same period one year ago.
An 18.1 per cent increase in lending to the financial intermediation sector in the year to the end of the second quarter of 2009 was largely attributed to a technical issue relating to the purchase of mortgage-backed securities by special-purpose vehicles (SPVs) created and financed by credit institutions.
Although this improves the liquidity profile of credit institutions, the net effect on total PSC is zero in many cases, the report said.
On a quarterly basis, lending to to the construction and real estate sectors was broadly static at €108.4 billion. However, for the year to the end of the second quarter, credit On an annual basis, it fell by 3.7 per cent, with write-downs and rising bad debt provisions believed to have been major factors.
Lending to the personal sector fell €563 million during the three-month period, with lending for mortgages declining by €194 million.
Lending to the non-property, non-financial corporate (NFC) sectors decreased 6.2 per cent, falling €3.3 billion. The latest fall mirrors a deteriorating trend that has been observed since the third quarter of 2008.
Negative valuation effects from increasing bad debt provisions by credit institutions had a knock-on effect on the credit outstanding to these sectors, which fell 7.7 per cent in the year.
Additional reporting: Bloomberg