Figures released by the Central Bank of Ireland (CBI) today show that in the month of August 2012, the reliance by Irish banks on central bank funding fell again in what has been a downward trend 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 reduced by €1.9bn in August 2012 from €121.6bn in July to €119.7bn in August. Lending directly from the ECB fell by €0.9bn in the month of August 2012, from €80.0bn in July 2012 to €79.1bn. Lending from the CBI to Irish banks, which is mostly known as “Emergency Liquidity Assistance” or ELA declined by €1.0bn, from €41.6bn to €40.6bn.
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. Overall the trend in Irish banks has been positive since the start of 2011 This is indeed 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 €79.1bn. 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. Last month, the Irish Department of Finance said that Irish banks now account for less than 5% of all ECB lending to EuroZone banks.
We will get deposit information on Irish banks for August 2012, at the end of September. Deposit analysis for Irish banks for July 2012 is available here.
Minor query, Your data for the “Whole” system is fom the Financial Statement of the Central Bank of Ireland which uses specific dates: July 27, Aug 31st etc.
Would you not be better off using the data from Table A.4? (Aggregate Balance) as this seems to report in the same manner as your data for the Irish-only banks (i.e. what appears to be the average in the month rather than simply a specific day in the month).
And many thanks for the info on the ECB’s current outstanding support.
@Rob, the Central Bank of Ireland publishes A4 at the end of the month following the month to which the data relates. A2 is published on the 2nd Friday of the month following the month to which the data relates, and is reported here. I don’t think you lose much and would doubt there is any massaging of figures taking account of a particular reporting day.
I just can’t understand the difference in the ‘whole system’ ECB reliance shown between the Financial Statement (€80,020m in July 27th) and Table A2 (€84,375m, also July).
@NWL
This is not good news. In fact it is dreadful news because of how it is being achieved, and the negative effect on the economy.
Yes, the banks are reducing their ‘dependency’ on ECB funding, but not because deposits are increasing. The ‘improvement’ is being achieved by reducing lending to every sector of the economy.
Lets look at probably the worst offender in that regard, AIB.
The AIB results at June 2010 can be see in the link below.
AIB Loans to customers reduced from €98.7 billion at Dec 2011 to €95.3 billion in June 2012, a reduction of €3.4 billion or an annualised reduction of almost 7%. By any reasonable standards this will have, and is having, a dreadful effect on the economy. Even the much vaunted ‘energy’ sector had its lending reduced by 37.2%, manufacturing by 11.6%, financial 10.9%, distribution 3.7%, agriculture 1.6%.
This is an unparallelled slash and burn campaign waged by the banks on behalf of the ECB/ German banks.
The real tragedy, is that this policy is being pushed along all the way by the Troika/CBI and government. Some of these people know exactly what the negative effects are, but could not care less. Some are too stupid to know or care about the negative effect it is having. The bottom line is that ‘Europe’ i.e the ECB wants its money back and it is bleeding Ireland dry to get it back.
http://www.aib.ie/servlet/ContentServer?pagename=AIB_Investor_Relations/AIB_Download/aib_d_download&c=AIB_Download&cid=1345654744827&channel=IRFP
@Joseph, I agree with the central point of what you are saying, and back in December 2010 there was a warning on here, that deleveraging to reduce the loan to deposit ratio would remove vast sums from our economy – it would have the opposite effect of the funds inflows during the boom/bubbles of the 2000s.
http://namawinelake.wordpress.com/2010/12/05/“deleveraging”-–-what-does-it-mean-and-what-does-it-really-mean/
But reducing our reliance on ECB funding when our deposits are increasing modestly is seen on here as generally positive, with Irish banks less dependent on official funding.
@NWL
Should have read ‘The AIB results at June 2012 can be see in the link below.’
The data I used is from .P24. Risk Management
This Catatrophic Shrinkage was well foreseen. As we have eschewed writing down mortgages we will have to shrink Productive sectors instead, shall we not???
Before NAMA > http://www.thepropertypin.com/viewtopic.php?t=23883&f=19
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