Figures released by the Central Bank of Ireland (CBI) today show that in the month of July 2012, the reliance by Irish banks on central bank funding declined by an impressive €5.4bn or 4% 1% bringing us back to levels last seen in August/September 2010. Lending by central banks to Irish banks comprises lending directly from the ECB and lending from the CBI. In total overall lending has fell by €5.4bn from €127.0bn in June 2012 to €121.6bn in July 2012.
Lending directly from the ECB fell by €4.6bn in the month of July 2012 – from €84.6bn in June 2012 to €80.0bn. Lending from the CBI to Irish banks, which is mostly known as “Emergency Liquidity Assistance” or ELA fell by €0.8bn, from €42.4bn to €41.6bn.
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 increasing which suggests an improvement in confidence and good news. Against the backdrop of a raging EuroZone banking crisis, the figures are particularly welcome, and 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 €80.0bn. 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 July 2012, at the end of August. Deposit analysis for Irish banks for June 2012 is available here.