Tuesday 12 November 2019

State €5.8bn boost for banks at time of stress tests

Laura Noonan

THE Government put an extra €5.8bn of public money on deposit with the six bailed-out banks around the time of the crucial March 31 stress-test results, it emerged yesterday.

The surge in state deposits is revealed in monthly statistics published by the Central Bank, which also show further outflows of 'normal' deposits and falls in lending to households and businesses.

The Government typically maintains balances of about €3bn with Irish banks throughout the year.

The latest data shows that government deposits across all banks trading in Ireland jumped from €3.12bn at the end of February to €8.9bn at the end of March.

The €5.8bn injection was exclusively focused on the group of 'covered' institutions -- AIB, Bank of Ireland, Anglo Irish Bank, EBS, Permanent TSB and Irish Nationwide -- where government deposits now stand at almost €8.6bn.

A spokesman for the Department of Finance last night confirmed the money had been put into the banks as an "ordinary deposit in the month of March".

On March 31, the results of the long-awaited stress tests were revealed, triggering announcements of a €24bn bailout, the merger of AIB and EBS and a €70bn sell-off of banks' non-core assets.

Banks were also told they must improve deposits books and reduce loans so they had only €122.50 loaned out for every €100 on deposit, against the prevailing rate of about €180 loaned out for every €100 on deposit.

The source of the money for the Government's €5.7bn deposit is unclear, but the spokesman said it had "nothing to do with" the first instalment of EU/IMF bailout in March.

If the extra government deposits are maintained, the money will improve the banks' funding positions and move them close to the 'loan to deposit' ratios set out in the bank restructuring plan.

The six banks shed €102bn in the year to March, including €25bn from Irish depositors, €12bn from the euro area, and €65bn from other areas.

Irish Independent

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