Tuesday 6 December 2016

ECB borrowings jump as banks load up on three-year money

Published 14/01/2012 | 05:00

IRISH banks' borrowings from the European Central Bank jumped by €5bn in December as institutions loaded up on three-year money offered at the end of that month.

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The rise in borrowings, which left Irish banks with an ECB tally of €107.2bn, was revealed in figures published by the Central Bank of Ireland yesterday.

Ireland's bailed-out banks are supposed to be reducing their reliance on ECB funding -- the Irish Independent understands this decrease in ECB funding continued in December.

The increase in the overall Irish bank figure is believed to stem from an increase in ECB fund IFSC banks.

Sources last night said the December rise was a one-off event triggered by the three-year money that was offered by the ECB on December 22.

Advantage

The IFSC banks appear to have taken advantage of this money.

Banks that were already funded with three-month or six-month money could have chosen to draw down three-year money that they don't need yet.

In that case, their borrowings will reduce over the coming months, as their 'old' borrowings term out and the overlap of old and new borrowings is removed.

Figures earlier in the week showed that Italy's ECB funding rose sharply in December, while Spain's banks doubled their reliance on longer-term ECB funds in the same month.

Analysts

Local analysts described the Italian and Spanish developments as "unsurprising" given the ECB's three-year operation, which loaned €489m to banks.

Yesterday's figures also show Irish banks' dependence on exceptional liquidity assistance (ELA) from the Central Bank of Ireland fell by another €1.6bn in December. The last-resort money is only loaned out if banks have run out of the high-quality collateral demanded by the ECB.

The support peaked at €70bn in February, but has fallen sharply since then as Irish banks took in more state cash and sold off assets.

At the end of December, banks had just €44bn of ELA.

Irish Independent

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