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Irish banks’ ECB borrowings rise to €130bn


Finance Minister Brian Lenihan. Photo: Bloomberg News

Finance Minister Brian Lenihan. Photo: Bloomberg News

Finance Minister Brian Lenihan. Photo: Bloomberg News

Irish-based lenders’ borrowings from the European Central Bank rose 7.3pc last month as the yield investors demanded to hold the state’s debt surged on concerns about its budget deficit and mounting bank losses.

ECB funds used by lenders including international and domestic companies climbed to €130bn as of October 29, from €121.1bn at the end of September, according to statistics published on the central bank’s website today.

Irish government bonds gained for the first day in almost three weeks today after European finance ministers said plans for a new system to handle euro-region debt crises won’t apply to outstanding debt.

Ireland's banks are becoming more dependent on the ECB after the central bank said in September a bailout of lenders may cost as much as €50bn as the state sinks more funds into nationalised Anglo Irish Bank and other lenders.

Finance Minister Brian Lenihan said yesterday markets didn’t “fully” believe the banking bailout figure and investors are taking a “wait and see” approach on bank losses.

The nation’s 10-year bond yield pared a two-day surge of more than 1 percentage point, and the difference, or spread, over German debt of similar maturity fell to 582 basis points today from 646 basis points yesterday. A basis point is 0.01 percentage point.

“Any new mechanism would only come into effect after mid- 2013 with no impact whatsoever on the current arrangements,” the finance ministers of Germany, France, Italy, Spain and the UK said in a statement distributed to reporters in Seoul today during the Group of 20 summit.

Ireland’s gross funding need for 2011 will be €23.5bn, falling to €18.6bn in 2014, the nation’s debt agency said today.

Moody’s Investors Service said last month Ireland’s Aa2 rating may be cut, while Standard & Poor’s and Fitch Ratings already have reduced their rating on the country on concern about the cost of bailing out banks.

Bank of Ireland, the largest Irish bank, has €20bn of net borrowings from “monetary authorities,” compared with €8bn at the end of June, executives at the bank said on a call with analysts today.

Chief Executive Officer Richie Boucher said that its deposit base has been “broadly stable since the end of September,” following outflows after Ireland’s sovereign rating was cut in August.

Bank of Ireland rose 5pc to 40 cents as of 12:25pm in Dublin trading, reversing earlier declines, while Allied Irish Banks soared 15pc and Irish Life & Permanent gained 4.7pc.

The country’s central bank provides an update on ECB funding reliance only for domestic institutions at the end of every month.

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