Yesterday the President of the ECB, Jean Claude Trichet gave the usual press conference following the monthly decision on interest rates and in the subsequent questioning from gathered journalists, Ireland featured prominently. He was directly asked “have Irish banks asked for extra Emergency Liquidity Assistance since the end of November?” and whilst he responded to the other part of the question put to him by the journalist he didn’t answer that part of it and he said that he had nothing to say on the extraordinary measures. He later claimed as “absurd” the suggestion by one journalist that the ECB might be facing insolvency. All of this is from about 23 minutes in the video of the press conference.
Today the Central Bank of Ireland released some information on our banks for the end of December 2010. And it appears that the CBI advanced an additional €6.4bn to the banking system in special liquidity measures (up to a balance of €51.094bn at the end of December 2010 from a balance of €44.674bn at the end of November). Reuters and the Wall Street Journal are claiming the CBI also released information today on ECB Emergency Liquidity Assistance to the end of December 2010 and both claim that ELA dropped from €136bn to €132bn but the CBI apparently did not provide a breakdown in ELA between the 20-odd domestic banks (which include the six embattled State-guaranteed banks) and the 430-odd banks in the IFSC which don’t service the Irish economy. This looks troubling because (a) the ELA totalled €138.199bn at the end of November 2010, not €136bn and (b) given the concerns over deposit flight from domestic banks, you would have thought the CBI would have gone out of its way to provide ELA figures for the domestic banks.
We must wait for the end of January for the release of deposit statistics for December 2010 but the betting is that deposits continued to fly out the door (if that wasn’t the case I would expect the banking authorities to break with any formal report schedule and calm depositors’ nerves with assurances that the massive flight of capital in 2010 had reversed.
There was an entry here last week which tried to examine how a continuing deposit flight would eventually undermine the banking system (both central bank and other). The conclusion was that although there wasn’t a theoretical limit to the support that could be given because ultimately the six State-guaranteed banks have only €150-200m in deposits. And although that’s a huge sum, it could theoretically be substituted by funding from the ECB. However practically that is not likely to be the case. So have the figures today confirmed that we have moved a step further to default, deposit controls and/or deposit writedown?