Tuesday 24 April 2018

Lenders in scramble to avail of cheap funding at final auction

Joe Brennan

Irish mortgage lenders' reliance on cheap funding from the European Central Bank (ECB) shot up 38pc to €47bn last month as they rushed to avail of the Frankfurt-based bank's last auction of 12-month funds.

The figures are contained in the latest monthly statistics out from Ireland's Central Bank.

The ECB departed last June from its normal practice of providing funds of up to three months, instead introducing six and 12-month money auctions in a bid to boost credit flows across the eurozone. It is due to hold its last six-month auction in March.

Home-loan providers had been using about €2bn of ECB funds to finance their activities before the US subprime crisis erupted in August 2007. But the figure jumped to €39bn a month after the collapse of Lehman Brothers -- sending wholesale markets into a tailspin.

It peaked at €72bn last June as lenders across the eurozone elbowed to take up the ECB's first 12-month auction, before tapering back to €34bn in November.

NCB Stockbrokers analyst Ciaran Callaghan said that banks' increased reliance on the ECB last month was also down to general volatility in the wholesale markets as a result of the Dubai debt crisis, as well as the higher cost of the new state banking guarantee.


The monthly figures also showed that overall borrowing by Irish-based lenders from the ECB rose to €90.9bn in December from €77.9bn the previous month.

Much of the overall borrowings, however, are out to international institutions with a presence in the IFSC.

Retail clearing banks -- Allied Irish Banks, Bank of Ireland, National Irish Bank and Ulster Bank, which are also included in the mortgage lenders category -- had €24.7bn out on loan from the ECB last month, up from €17bn in November.

Irish Independent

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