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Archive for March 11th, 2011

Later today, the Central Bank of Ireland (CBI) will release its own financial statement for February 2011 reflecting the position on Friday 25th February – Table A2 linked here. The expectation on here is that emergency liquidity assistance which has been at an elevated level for several months and €51bn at the end of January 2011 will drop substantially to reflect the effects of several Irish financial institutions self-issuing Fixed Rate Notes to themselves at the end of January which allow those banks to access ECB funding rather than CBI funding. The self-issuance, which totalled some €16bn in Jan/Feb, seems to have been a technical manoeuvre by the banks concerned, to convert sterling backed securities which are not eligible for obtaining loans from the ECB for euro backed securities which are.

So the expectation on here is that CBI emergency liquidity assistance to Irish banks will show a drop in the double digits but that ECB funding will increase, perhaps correspondingly. At the end of January 2011, the ECB had €126bn of funding advanced to Irish banks (of which €96bn was advanced to the 20 financial institutions which service the domestic economy).

The word from the IMF and backed up by Bank of Ireland’s update in February 2011 was that deposit flight was moderating, particularly in respect of Irish businesses and households. January’s detailed banking financial statements revealed that deposit flight was still ongoing at an elevated level but had moderated compared to December 2010. Today’s information from the CBI will not directly confirm the deposit position in Irish banks at the end of February 2011 but will give a steer because the elevated levels of assistance from the CBI and lending by the ECB in recent months have, to a large extent, been to replace deposit flight.

There will be an update here later.

UPDATE: 11th March, 2011. The figures have just been released and contrary to expectation, other assets which includes Emergency Liquidity Assistance (ELA) has leapt €19bn in the month from €51.1bn to €70.1bn whilst Eurosystem support had dropped €9.1bn from €126bn to €116.9bn. The Fixed Rate Notes issued at the end of January 2011 were expected to result in a reduction in the call on ELA (which is relatively expensive) and a corresponding increase in funding from the ECB (which is relatively cheap). That seems not to have happened and between CBI & ECB support, overall reliance by Irish banking on central bank support leapt by €10bn in the month to a record €187bn.

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