Figures released by the Central Bank of Ireland (CBI) today show that in the month of June 2012, the reliance by Irish banks on central bank funding rose by €1bn or just under 1% – the first increase since December 2011. Lending by central banks to Irish banks comprises lending directly from the ECB and lending from the CBI. In total overall lending has increased by €1bn from €126.0bn in May 2012 to €127.0bn in June 2012.
Lending directly from the ECB increased marginally by €0.1bn in the month of June 2012 – from €84.5bn in May 2012 to €84.6bn. Lending from the CBI to Irish banks, which is mostly known as “Emergency Liquidity Assistance” or ELA rose by €0.9bn, from €41.5bn to €42.4bn.
What does this mean for Irish banking and the wider economy? If our banks are to return to some degree of normality, they will rely more on deposits from customers and lending from other banks. So today’s figures indicate – though don’t absolutely prove – that deposits and inter-bank lending are decreasing which suggests a deterioration in confidence and bad news. However the increase in the month of €1bn is quite small and when the turmoil in Europe is considered, it would still appear that the trend overall in Irish banks appears to have been positive for the past 12 months, with deposits stabilising and growing slightly whilst reliance on the ECB has declined. This is positive news, particularly given the jitters in other EuroZone countries, such as Spain, Greece and Italy.
It is worth pointing out that ECB direct lending to Irish banks today stands at €84.6bn. This compares with a €3tn ECB balance sheet, and indicates that Irish financing arrangements are now proportional to our economy, and that the ECB is no longer providing “unprecedented” support to Irish banks.
We will get deposit information on Irish banks for June 2012, at the end of July. Deposit analysis for Irish banks for June 2012 is available here.