I really don’t understand why it is Ireland’s Department of Finance (DoF) producing this information, and not the Central Bank of Ireland (CBI), but regardless, it seems as if we are to get a new monthly informational bulletin from the DoF on deposits held in state-guaranteed or so-called “covered” banks – AIB (including EBS), Bank of Ireland, Permanent TSB and IBRC (the Irish Bank Resolution Corporation, the merger of Anglo and Irish Nationwide Building Society). The new bulletin gives details of what it calls the “consolidated” deposits in Irish banks.
The CBI already produces monthly figures on private sector deposits in the covered banks, but the CBI’s figures exclude deposits held in “overseas subsidiaries” of the covered banks and also include what are described as “intercompany deposits”.
So what do we learn? We see that “consolidated deposits” flowed out of the covered banks for the first six months of 2011 – averaging €2.5bn per month from a base of about €150bn. Deposits remained flat in July and August 2011, and then for the last four months of the year deposits flowed back in at an average rate of €1.8bn per month, so at the end of 2011 there were €147bn of “consolidated deposits”. I use the term “flow back” deliberately – a FG politician recently made that claim in those terms which was disputed on here at the time; that was because it was assumed he was talking about deposits in Ireland in Irish banks but if he was talking about all deposits including those in other jurisdictions then his terminology is correct.
The new figures are to be welcomed, but I really don’t see how deposits in “overseas subsidiaries” have a big impact on the Irish economy. For example, Bank of Ireland has a joint venture in the UK with the Post Office, and the last time I checked the venture had about €10bn of deposits. What does it tell us about the Irish economy if that increased to €11bn. Presumably it can’t form the basis of lending in Ireland, but I suppose it does help support the bank overall which means lessens the State’s potential exposure to it.
The DoF was asked for further information on the quantum of “overseas subsidiary” and “intercompany” deposits. If there is any update, it will be posted here.
Pardon my ignorance but what are intra-group deposits. What is the benefit of excluding them?
Ah. I see.
Considering the adage that you can’t teach an old dog new tricks, what’s to stop the Central Bank transferring/giving short term loans to the banks at the end of the month when the DoF is compiling the figures. The CBI then takes the loan back the day after. This trick was employed extensively by Irish banks under the supervision of the CBI for many years and I haven’t seen evidence that the practice has been barred or punished.
And yes, I really do mean to suggest that this is exactly what the CBI and DoF are up to because at this stage I have lost all confidence in any figures or statements that they produce, and view both as being bereft of credibility. I’ll hold these opinions until their operations become a little more transparent than giving out “consolidated deposits” and “other assets”.
Like Paul, I’m in ignorance. Do “inter-group” deposits result in double counting?
@WSTT, the Central Bank was asked on more than one occasion to explain the “inter-group” or “intercompany” workings, and didn’t in any meaningful way. I can think of two scenarios which might confuse the figures (1) an overseas subsidiary of a bank deposits funds in the Irish branch (2) a group company of the bank, perhaps involved in insurance or financial products deposits funds in the Irish branch.
There is a reason why this blog has focussed on deposits by ordinary households and businesses (non financial businesses) and that is that these two sources are seen to be typically representative of the economy and if deposits from these two sources are reducing then that is bad news for the economy and restricts the banks’ basic ability to lend, whereas if these deposits are growing it is good news.
Am still awaiting a response from the DoF – c’mon guys and gals, now that Kevin Cardiff is practically out the door, aren’t we sound again?! – and will update the blogpost above if any emerges.
@WSTT/Paul, it looks like we’re not going to get more information from the Department of Finance, but Laura Noonan has intel from a “source close to the Department”
http://www.independent.ie/business/irish/department-figures-show-5bn-deposits-rise-in-bailedout-banks-3019821.html
“Sources close to the Department of Finance said it was “unfortunately” not possible to reconcile the two since their information came from “completely different sources”"
This is unsatisfactory because you really have to wonder what relevance Bank of Ireland’s deposits from its joint venture with the UK Post Office, have to the Irish economy. Does the c€10bn improve lending prospects in the State? Does it say anything about confidence in the Irish economy?
It seems strange that the DoF can’t at least confirm the deposits held in overseas subsidiaries.
Interesting NTMA presentation http://www.businessinsider.com/this-presentation-is-going-to-make-the-greeks-wildly-jealous-2012-2
Slide 6 is especially humorous, giving the 2011 deficit figures but excluding the bank recapitalization figures. The rest reads more or less like a 5 year plan press release.
I stand by my previous post.
Just to confirm with you NWL,
These DoF figures are simply the Private sector table of the CBI’s ‘Covered Banks’ figures but with the inclusion of foreign subsiduary deposits?
@Rob, no, there is a second distinction – which is that the DoF figures eliminate the effect of intercompany deposits. This really is unsatisfactory, and it’s bad enough that the Central Bank of Ireland refuses to provide an analysis of private sector deposits in covered banks each month between ordinary households and businesses – it DOES provide that analysis for ALL banks, but it won’t do it for the covered banks that count most to this country’s future, but as bad as that is, the DoF producing numbers and declining to provide a quantum for overseas subsidiaries or intercompany deposits is just as bad – that information should be readily to hand.
Ah of course, which was the initial criticism when they first started producing these figures back last year.
Thanks for that NWL.