Honohan notes doubling of Central Bank lending
CENTRAL Bank Governor Patrick Honohan yesterday played down suggestions that his organisation was taking on too much risk after almost doubling the size of its balance sheet last year as it came to the aid of distressed Irish banks.
The ramped-up activity helped the Central Bank of Ireland to earn profits of €840m last year despite rising costs and investment write-offs, leaving some €670m of "surplus income" to be returned to the cash-strapped state.
Asked whether the rapid growth in the Central Bank's balance sheet to €205bn was a cause for "concern", Mr Honohan yesterday said that the situation was a "response to an adverse scenario".
"The Irish banks drew down wholesale funding at a time when Ireland was a triple A country, during the second half of 2010. They weren't able to roll over the money so they had to turn to Central Bank funding," he said.
A spokesman for the Department of Finance last night confirmed that the "overall" amount guaranteed by the State was on a "general downward trend".