Tuesday 17 October 2017

ECB loans to bailed-out banks static despite €15bn sector fall

Laura Noonan

Laura Noonan

BAILED-out banks' borrowings from the European Central Bank (ECB) remained virtually unchanged last month even though ECB loans to Ireland's overall banking sector fell by €15bn, the Irish Independent has learned.

The drop in overall ECB borrowings was revealed in new figures from the Central Bank of Ireland, which showed banks based in Ireland owed just over €92.5bn to the ECB on January 27.

The detail includes bailed-out banks, "domestic" banks that are active in the Irish market and IFSC banks that are legally based here but do little of their trade in the local market.

The Central Bank of Ireland won't give a detailed breakdown of who owes what until later in the month, but the Irish Independent understands that the bailed-out banks accounted for virtually none of January's fall in ECB loans.

Sources said the fall was largely linked to an 'overlap' that happened when foreign-banks took up money from the ECB's three-year funding operations in December.

Overlap

The overlap meant that banks borrowed new three-year money when they already had money out from the ECB's "normal" three-month operations. When that three-month money timed out, it was not replaced and the overlap abated.

Yesterday's Central Bank of Ireland figures also showed a marginal rise in the Exceptional Liquidity Assistance (ELA) that's being provided to bailed-out banks who've run out of the high-quality collateral the ECB demands.

That support was up about €1.3bn -- a figure that roughly corresponds to the €1.25bn bond controversially repaid by Irish Bank Resolution Corporation (formerly Anglo Irish Bank) in January. ELA stood at about €45bn on January 27.

The ELA is administered through the Central Bank of Ireland, which also undertakes the risk for any losses if the bank can't pay back the cash and the bank's collateral is inadequate to repay what's owed.

Finance Minister Michael Noonan has also provided the Central Bank with a "letter of comfort" that any losses on the ELA operations will be picked up by the State.

Irish Independent

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