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Archive for June 10th, 2011

It somehow seems inappropriate not to respectfully mention the death of former Minister for Finance, Brian Lenihan who died earlier today at the age of 52 after a 2-year battle with cancer. There are better places than here to comment or pay tribute to the man, for example at irisheconomy.ie.  Whilst Brian Lenihan and his policies will have had critics in life, understandably there have been many tributes paid today; this from the governor of the Central Bank ofIreland, Patrick Honohan,

“Brian Lenihan was a strong and energetic Minister for Finance who acted patriotically to stabilise the state’s finances in the face of unprecedented pressures. His quick intellect and grasp of constitutional detail made it a pleasure to conduct professional dealings with him. His death is a major loss to public life in Ireland.”

Last August 2010, then-Minister Lenihan became the first Fianna Fail politician to deliver the Michael Collins commemoration speech at Beal na mBlath. The speech is poignant for the many similarities between Brian Lenihan and Michael Collins, both being finance ministers and both sharing many personal and public qualities  And on this day, I think many will wonder, as Brian Lenihan did of Michael Collins last year, if premature death has robbed us of future greatness.

Ar dheis De go raibh a anam

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Figures due out later today from the Central Bank of Ireland (CBI) will show the extent of the reliance of our banks on funding from both the CBI and the ECB at the end of May 2011. At the end of April, some €54bn was provided by the CBI to Irish banks in the form of Emergency Liquidity Assistance (ELA). At the same time, the ECB had provided an additional €106bn in non-standard liquidity to all Irish banks (and of that, €78bn was provided to the 20-odd financial institutions that service the Irish economy). April’s figures represented a significant €21bn drop from March 2011 and indeed brought us back to levels last seen in October 2010. However deposits in Irish banks were boosted in April by the state-controlled National Treasury Management Agency depositing funds received from the IMF/EU as part of the bailout which are earmarked for the bank recapitalisation, which will not happen until July 2011, and also by the liquidation of a large part of our strategic reserve, the National Pension Reserve Fund (by liquidation, I mean shares and bonds were sold by the NPRF and the cash received was placed on deposit in Irish banks). There is unlikely to be the same degree of impact in May 2011, though we did receive about €4.39bn from our bailout creditors during the month as evidenced by the May 2011 Exchequer Statement.

A lessening reliance on CBI and ECB funding would be seen as good news, in that it might signal increased confidence from depositors willing to risk placing their monies in Irish banks. It would also mean that Ireland is less exposed to this giant strategic threat from the ECB to withdraw its non-standard liquidity facility or possibly change the rules by which it can be accessed. At yesterday’s ECB press conference, ECB president Jean-Claude Trichet stated the facility would be maintained until October 2011, which might provide some comfort. There is however no sign as yet of a medium term facility that would guarantee our banks’ access to central bank funding, whilst the normal funding market is effectively closed to Irish banks because of the high perception of risk.

This post will be updated later today when the CBI issues it figures. We will not get to see the deposit figures for Irish banks for May 2011 until the end of June 2011.

Below is the history of CBI and ECB funding of Irish banks since the bank guarantee was given during the financial crisis in September 2008.

UPDATE: 10th June, 2011. The Central Bank release is now available and shows “Other Assets” which are understood to mostly comprise ELA has edged downwards slightly during the month by €447m from €54,146m in April to €53,699m at the end of May 2011. Funding from the ECB has also reduced by €3,786m from €106,130m to €102,345m.

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