ECB to scale back support of our banks after bailout
OUR acceptance of a bailout package will allow the European Central Bank (ECB) to "gradually" pare back its support of the banking sector, an ECB governing council member said yesterday.
The comments came as new figures revealed that European banks borrowed €38.2bn of cheap three-month money from the ECB yesterday, well above the market expectations of €29bn.
Country-by-country breakdowns aren't available, but Irish banks are believed to have been among the main beneficiaries.
Recent figures showed both AIB and Anglo Irish Bank had lost €13bn in deposits so far this year, while Bank of Ireland lost about €10bn of deposits over a six-week period in August/September.
Our domestic retail banks are believed to owe about €90bn to the ECB, or about a fifth of the institution's total loans, while another €34bn is owed to the Irish Central Bank.
Earlier in the month, ECB president Jean Claude Trichet said it was "not a normal situation" to have banks "addicted" to ECB cash, adding that the ECB was reflecting on "how to deal progressively with this problem".
Luxembourg Central Bank boss Yves Mersch, who sits on the ECB Governing Council, said he "welcomed" developments here.
"The programme will lead to stability in Ireland, this will allow us to continue on our gradual and prudent exit strategy," he said.