Monday 23 October 2017

Banks borrowed €16bn from ECB and Central Bank in November

Data shows ECB lent €6bn, while Dame St stumped up €10bn, increasing the exposure of the Irish taxpayer

Patrick Honohan, Governor of the Central Bank of Ireland. Photo: Tom Burke
Patrick Honohan, Governor of the Central Bank of Ireland. Photo: Tom Burke
Donal O'Donovan

Donal O'Donovan

IRISH banks borrowed a further €16bn from the ECB/Irish Central Bank system in November -- its latest statistics have revealed -- in a sign of the pressure on the financial system.

The data last night confirmed that lending to the banks was increasingly being pushed back on to the Irish taxpayer through the Central Bank, rather than coming from the ECB in Frankfurt.

The Central Bank's statistics show that lending from the ECB to banks in Ireland increased from €130bn at the end of October to €136bn.

Meanwhile, lending by the Central Bank increased from €34bn to €44bn. Of this total of €180bn, more than €130bn is believed to be owed by domestic Irish banks.

"It's not surprising that the figure has increased, given the volatility in financial markets in November," said Rory Murray, an analyst at Dublin-based fixed-income firm Glas Securities.

But the scale of the borrowing is a surprise, especially the amount now owed to the Central Bank.

The Central Bank declined to comment on the breakdown of the assets in the 'other assets' column in the monthly statistics 'credit, money and banking statistics data release' published last night.

But a spokesman confirmed it included "exceptional liquidity assistance to institutions when that is judged necessary".

Lending by the Central Bank to banks here has quadrupled over the last 12 months. Lending by the ECB has increased from €78bn to €136bn over the same period.

The Central Bank would not comment on how it financed the €44bn of loans, but banking sources said the funds were likely to have ultimately come from the ECB.

Shares in Bank of Ireland closed down 12.9pc at 41.3c each, shares in AIB were down 12pc at 43.9c each and Irish Life & Permanent was down 4.6pc at €1.20 a share.

The apparently dry tables paint an astonishing picture of banks borrowing massive sums at the same time as politicians here tried and failed to fend off an EU/IMF bailout last month.

Indeed, the scale of the dependence on public sector funds was undoubtedly behind the ECB's insistence that Ireland needed a more formal mechanism to access funds.

"Given all the noise that has taken place, I think until the restructuring plans become clearer and implementation commences -- in other words, the sell-down of the bank assets commences -- I think realistically (getting back to the markets) is not going to happen until then," said Jim Ryan of Glas Securities.

Deposit outflows

"The best one can hope for in 2010 is to stop deposit outflows and then in 2011, when matters become clearer, we should start to see some inflows again," he added.

The statistics show that Irish banks -- shut out of private sector debt markets thanks to their own reckless lending practices -- have become increasingly hooked on Central Bank support for loan requirements.

The figures for borrowing from the ECB includes lending to IFSC banks as well as banks with branches.

Previous data from the Irish Central Bank showed that two-thirds of borrowing from the ECB was by Irish domestic banks at the end of October.

Based on that proportion, domestic lenders owed more than €130bn to the Central Bank system.

Irish Independent

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