Sunday 19 November 2017

Emergency lending to banks rises to €158bn, latest figures reveal

Banks

Donal O'Donovan

Donal O'Donovan

EMERGENCY lending to the Irish banks rose in June, for the first time since February. Borrowing by the banks rose slightly from €156bn to €158.6bn last month -- a mix of borrowing from the European Central Bank (ECB) and from the Irish Central Bank.

The banking sector has been dependent on the soft, short-term loans since banks were locked out of normal markets early last year.

The emergency borrowing rose rapidly last year as banks needed cash to fund deposit withdrawals by corporations moving cash out of Ireland, and repayments of banks' own borrowing as it had to be repaid.

The banks' balance sheets had stabilised after the country began to draw down bailout loans from the IMF and EU. The NTMA placed the cash on deposit with Irish banks to bolster their deposit base and shore up confidence in the lenders.

A reverse in that trend makes the latest increase in emergency loans disappointing, even if it is small, according to Alan McQuaid of Bloxham Stockbrokers.

He said it confirms the need for the ECB to make a more medium-term lending facility available. On Thursday, the ECB ruled out the creation of such a mechanism.

"The numbers confirm that the pressures continue in terms of the Irish banking system, even if the intensity of the problem has eased somewhat in recent months," said Austin Hughes, chief economist with KBC Bank.

According to the latest Central Bank statistics, banks had borrowed €55.7bn from Ireland's own central bank through its Emergency Liquidity Assistance (ELA) programme on June 24, up from €53.7bn at the end of May. Lending from the ECB rose from €102.345bn in May to €103bn at the end of June.

The Government is on the hook for any losses suffered on the loans from the Irish Central Bank, but the €53.7bn is not being included in official statistics, so the government guarantee is not included in debt statistics until they are called.

Although it doesn't include them in its overall figures, Eurostat, the EU statistical agency, does report three such contingent liabilities when it publishes Irish data. They include borrowing by NAMA, the bank guarantee scheme and the emergency loans to banks.

Irish Independent

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