Monday 18 December 2017

State puts €19bn of bailout cash on deposit with banks

Laura Noonan

THE Government has put €19bn of bailout money on deposit with Ireland's four "continuing" domestic banks, helping the quartet drastically reduce their dependence on last-resort central bank money.

The National Treasury Management Agency (NTMA) confirmed the "temporary deposit" yesterday afternoon, after figures from the Central Bank of Ireland showed a €20bn decline in the banks' liquidity support.

The €19bn of Government deposits came from Ireland's international bailout fund and is earmarked for recapitalisation of AIB, Bank of Ireland, Irish Life & Permanent and EBS.

"On or before July 31, the deposits will be returned to the State to provide the funds necessary for the recapitalisations," the NTMA said, adding that the deposits had "no unusual features".

The deposit injection was a "practical step" and not a condition of the €85bn bailout agreed with the European Commission, the European Central Bank and the International Monetary Fund, sources said.

The Government had drawn down some €17.8bn of bailout funds by the end of March, a schedule that was hammered out when the banks' recapitalisation was due to take place at the end of March.

The commercial banks offer better deposit interest rates than the Central Bank of Ireland, so a decision was taken to hold the money in the four of them.

The authorities are also likely to have been mindful of the fact that the deposit injection would play well in Frankfurt since it would ease banks' massive dependence on last-resort central bank money.

The NTMA declined to reveal how the deposits were split between the four banks. Spokespersons for AIB and Bank of Ireland also declined to comment on how much their institutions had received.


Investors may push individual banks to disclose how much they got at the half-year results point, if the figures have not been revealed at that stage. Spokespersons for the banks declined to comment on this.

Yesterday's Central Bank of Ireland data showed Irish banks' dependence on "emergency" liquidity from it dipped from €66.8bn on March 25 to €54.1bn on April 29.

This is paid out by the Central Bank, which borrows the money from the ECB and lends it on locally. All "emergency" liquidity is covered by an "explicit" government guarantee.

Irish banks' reliance on direct ECB money also dipped in the month to April 29, falling from €114.5bn to €106.1bn.

The figures cover all banks regulated in Ireland; data breaking out the ECB drawings of the six bailed-out banks will be available in about a fortnight.

ECB President Jean-Claude Trichet has repeatedly expressed concerns about "addicted" banks that have become hooked on cheap central bank money,

But the ECB's response to the latest bank bailout plan gave a clear sign that it will not turn the tap off on money for the Irish banks. The Frankfurt-based institution issued a statement saying it would "continue to provide liquidity to banks in Ireland".

Irish Independent

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