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€10bn pulled from banks in October by depositors

INTERNATIONAL depositors pulled another €10bn out of Irish banks in October, dashing hopes that the flight of cash ended in September when the bank guarantee was extended.

The massive October outflow was confirmed by Central Bank figures published yesterday, which also showed a €2.5bn surge in Irish banks' dependence on cheap European Central Bank (ECB) money.

Ireland's biggest banks had already admitted losing more €36bn in deposits so far this year but, crucially, those outflows were attributed to one-off events in September.

Bank of Ireland said it had lost €10bn in deposits in a six-week period over August and September.

The €12bn in deposits lost by AIB over the four-and-a-half months to mid-November and the €13bn lost by Anglo in the year to mid November were also believed to have been heavily weighted to August/September.

The latest figures showed that while deposits from Irish residents held stable at €166.7bn in October, deposits from international sources continued to flow out.

"Rest of world" deposits were the worst hit, falling by €8bn to €170.6bn, while euro area deposits shrunk €2bn to €22.4bn. No breakdown between company, private and government money is given.

The figures mask the full extent of the falls at 'true' Irish banks, since they don't capture the flight of deposits from home-grown institutions to Irish-regulated institutions like National Irish Bank and Rabobank. Anecdotal evidence suggests Irish consumers have been transferring their money from Irish-owned banks to institutions like Rabobank in recent weeks.

But the Central Bank figures only show that consumer deposits in Irish-regulated banks stayed largely stable at €96.2bn in October, giving no visibility on flows between Irish-owned banks and others.

Similarly, the figures for Irish companies show a slight rise in the level of deposits placed with Irish-regulated banks (€35.5bn), but offer no insight into how much money has gone from Irish-owned banks to others regulated here.

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Irish-owned banks are widely believed to have suffered further deposit falls in November as intense speculation on their futures made consumers fear for their cash.

Corporates may also pull another whack of their cash out of the banks later in the year, when a further raft of bank downgrades is expected to be unveiled by ratings agencies.

Yesterday's Central Bank figures also chart the domestic institutions' increasing dependence on cheap money from the European Central Bank (ECB) and the Central Bank of Ireland.

Money from the ECB rose from €83bn at the end of September to just over €85.6bn at the end of October.

Figures previously released showed Ireland's banks' reliance on Central Bank of Ireland money rose more than €2bn in October, to €34.6bn.

The figures come ahead of an ECB meeting being held tomorrow where central bankers will discuss the future level of support to be given to Europe's banks.

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