Thursday 27 July 2017

Figures reveal €100bn deposit exodus from 'covered' six

First data from Central Bank detailing losses shows lenders using state guarantee scheme suffered €17bn hit in January

The Central Bank in Dublin. Photo: Getty Images
The Central Bank in Dublin. Photo: Getty Images
Laura Noonan

Laura Noonan

THE Central Bank yesterday published the first data detailing the loss of deposits and the rise in central bank supports for banks using the government guarantee scheme.

Previous instalments of the Central Bank's monthly credit data had grouped the six 'covered' Irish banks with about 10 other banks that have retail businesses in Ireland.

But yesterday's figures revealed the performance of AIB, Bank of Ireland, Permanent TSB, EBS, Irish Nationwide and Anglo Irish Bank as one group for the first time.

The six 'covered' banks lost another €17bn in deposits in January, bringing the deposit exodus since the start of 2010 to just over €100bn.

But 75pc of January's deposit fall is understood to relate to accounting manoeuvres and intra-group transfers between Irish banks, which are not "netted off" in the data.

Deposits from outside the euro area were by far the most volatile over the past three months, plunging from €154bn at the start of 2010 to €88bn at the end of January.

Withdrawals

The bulk of the foreign withdrawals are understood to involve the 'Monetary Financial Institutions' category including banks and money managers.

That category also includes intra-group positions, where banks move money between their non-euro subsidiaries and subsidiaries based in the euro area.

This inter-group action could have accounted for a significant portion of the €66bn deposits' flight, but hard data confirming this is not available.

Non-euro money also includes money managers who are often sensitive to changes in banks' credit ratings and would have been spooked by the many downgrades suffered by Irish banks last year.

Irish deposits accounted for the second biggest drop, falling from €252bn at the start of 2010 to just over €225bn at the end of January, including a €9bn fall in January alone.

Private sector deposits, including ordinary savers and non-financial corporates, fell about €20bn to €112bn over the 13 months.

November was the biggest flash month, with €7.9bn in private Irish cash leaving the banks as the bailout loomed large, but withdrawals remained high in December (€3.4bn) and January (€1.8bn).

The latest data also shows the six 'covered' institutions' dependence on cheap cash from the European Central Bank (ECB), which they can access by pawning high-quality assets.

ECB borrowing rose by some €1.5bn in January to €92.9bn, its highest level among the group of six.

The rise comes as the banks embark on a short-term project of issuing government-guaranteed bonds to themselves so they can access ECB cash.

On the lending front, the latest Central Bank data shows lending to households (from across all banks) fell by 5.1pc in January, a slight easing of the 5.3pc contraction in December.

Lending to companies also fell, as businesses paid back €24m more than they drew down in January.

The data shows a €168m fall in short-term business loans (less than one year) in January, a €560m rise in medium-term business loans and a €415m decline in loans for longer than five years.

Irish Independent

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