Over €70bn in deposits fled Irish banks in 2010
IRELAND'S domestic banks have haemorrhaged more than €70bn in deposits in the past year, as savers and company treasurers pulled their cash out of our financial institutions.
The massive flight in deposits is revealed in an analysis of monthly data from the Central Bank and charts a period of unprecedented turmoil in Ireland's financial landscape.
The figures show our banks lost €69.5bn of deposits between the start of 2010 and the end of November. Further outflows are likely to have occurred in December, putting 2010's total deposits exodus at well over €70bn.
The deposit fall was cushioned by a €39bn rise in support from the European Central Bank over the 11 months, while the overall size of Irish banks' liabilities books shrunk by about €32bn.
The data covers about 20 "domestic credit institutions", incorporating the traditional Irish banks plus foreign players with Irish retail operations like KBC, Rabobank and Northern Rock.
As such, it masks the likely flight in deposits from 'traditional' Irish banks to foreign-owned institutions like Rabobank and National Irish Banks, which are perceived as 'safer'.
Companies and savers outside the euro area were by far the main contributors to the deposit collapse. These depositors closed November with just €155bn in Irish banks, sharply down from their €202bn in deposits at the start of 2010.
The €47bn flight in non-euro deposits was concentrated in two key periods -- between February, March and April about €16m in deposits were pulled, and between September, October and November about €38bn was withdrawn.
The spring withdrawals came as the Financial Regulator told Irish banks they would have to raise billions to meet future losses.
There was a rebound soon after as non-euro deposits rose by €7.6bn in May.
But a second critical phase began in September 2010, as fears about the ending of a government guarantee on deposits and a raft of Irish bank downgrades triggered a €14.7bn flight of non-euro deposits that month.
Another €7.8bn fled in October 2010, as Ireland's financial position became more precarious and the government guarantee (which remained in place) was deemed worthless.
And a further €15.6bn was pulled in November, as fears over Ireland's sovereign position intensified culminating in the arrival of the European Central Bank and International Monetary Fund.
Deposits from countries within the euro were also sharply hit over the year, falling from €26.4bn at the start of 2010 to €17.6bn at the end of the year. The pattern of withdrawals largely followed that of the non-euro deposits.
Industry sources say deposits from outside Ireland are the most vulnerable since they are often 'ratings sensitive' and forced to move when Ireland's banks are downgraded.
Non-Irish deposits are also heavily weighted towards corporate deposits, which have no particular allegiance to Ireland and are risk-adverse by nature.
On the home front, deposits from Irish residents fell €13bn to €297bn in the 11 months to November.
The fall was led by private-sector depositors, who took €16bn of their cash out of Irish banks. The worst month for Irish private cash fleeing the banks was November, when more than €6bn was withdrawn.
Meanwhile, Irish financial institutions' deposits in other institutions rose over the 11-month period, as did deposits held by the Government.