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Irish banks' debt securities dropped by almost €12bn in February

THE volume of debt finance supporting Irish banks plummeted by €11.6bn in February as bond redemptions greatly outstripped the value of bonds issued by both domestic and IFSC banks.

The sharp contraction is revealed in new figures from the Central Bank and is in stark contrast to the €74.4bn of net issuances recorded by banks across Europe over the month.

The fall in Irish banks' debt securities included a reduction of about €6bn in bonds and other securities issued by 'domestic' lenders, a group of about 20 banks that have retail operations in Ireland.

Yesterday's figures also show Irish banks have almost €43bn of bonds maturing over the next 12 months. The figure is overstated by as much as €17bn because bailed-out banks have been issuing 'own use' bonds for funding purposes. These bonds typically have a three-month maturity but are usually rolled-over since the same bank is the issuer and owner.

Stock up

Yesterday's data also confirms the substantial rise in the percentage of Irish sovereign debt held by our banks. They now hold about 20pc of Ireland's €85.3bn of long-term government bonds.

The rise in dominance from Irish banks comes as foreign investment in sovereign bonds fell by more than 12pc in the year to February, while domestic institutions used cheap Central Bank money to stock up on government bonds.

The figures don't break down holdings of domestic banks and IFSC operators, but domestic banks are understood to account for the vast majority of the total. Two years ago, Irish banks held about 12pc of government bonds.

Beyond the banks, 'other financial intermediaries' saw a €2.6bn contraction in their debt securities in February, sharply better than the €8.2bn contraction they endured in January.

They have a total of €91.4bn of debt securities falling due in the next 12 months.

Debt securities issued by Irish 'non-financial corporates' remained broadly unchanged at €3bn in February. About 20pc of this money, or €660m, falls due in the next year.

Irish Independent