Tuesday 25 July 2017

Level of ECB funds in system unlikely to peak again

Laura Noonan

Laura Noonan

THE autumn's massive refinancing of Ireland's banks is unlikely to push the sector's reliance on Central Bank funding back to its April 2009 peak, senior analyst with ratings agency Fitch said yesterday.

In the spring of 2009, Irish banks' reliance on European Central Bank (ECB) funding soared to more than €120bn as hostile wholesale markets closed out other funding options.

The level of ECB money in the Irish banking system has since dipped to about €90bn, but is expected to begin rising again as €30bn of debt redemptions loom by the end of the year and elements of the government guarantees lapse.

In a research note published last week, Fitch had expressed "concern" about the funding outlook for Irish banks but Fitch analyst Matthew Taylor yesterday said the sector's ECB funding was unlikely to return to its peak.

Mr Taylor said the Irish banks needing to borrow all €30bn from the ECB, having gotten nothing from the market, was the "worst possible case" and stressed that smaller balance sheets meant the banks' need for funding would decline.

Mr Taylor also pointed out that Irish banks are seeing higher levels of retail funding, as ordinary consumers use deposit and savings accounts to hold money "which might otherwise have been invested in the stock market or insurance policies".

Fitch's overall projections are for Irish banks to report losses in 2010, as writedowns on loans transferring to the National Asset Management Agency (NAMA) exceed revenue, while "sizeable" impairment charges on non-Nama loans exasperate the situation.

"For 2011, things should start to look better as the economy picks up and loan impairment charges should be smaller," Mr Taylor said.

Irish Independent

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