Yesterday the Central Bank of Ireland (CBI) released its monthly Financial Statement in which it records total reliance of all Irish banks (including those that don’t service the Irish economy) on central bank funding on 24th June 2011. The figures show an increase of 2% or €2.7bn compared with May 2011 in funds provided by the central banks (the ECB and CBI) – central bank funding to Irish banks now stands at €158.7bn, up from €156bn in May 2011 but still down from the all-time high of €187bn in February 2011. Most of the decrease from February 2011 is accounted for byIreland’s National Treasury Management Agency (NTMA) placing some €21bn of bailout funding, received from our bailout creditors plus some liquidation of funds in the National Pension Reserve Fund in advance of recapitalising the banks in July 2011, on deposit in Irish banks.
In June 2011, there was a marginal €19m net drawdown of funds from the bailout (as evidenced by the June 2011 Exchequer Statement) so the increased reliance on central bank funding would seem to indicate a continuing outflow of deposits from Irish banks, with the resulting hole being filled by central banks.
Funding from the ECB rose marginally in the month of June to €103bn from €102.3bn in May 2011. This funding is understood to be provided at the ECB’s main refinancing rate (now 1.5% following the 0.25% increase on Thursday last). In addition to ECB funding, the CBI provided €55.7bn of funding to Irish banks, up from €53.7bn in May 2011. This funding is understood to be more expensive, costing 3%+. Both rates are substantially below the cost of funds that Irish banks would have to pay to access funds from the open market, if indeed the open market would lend anything significant to Irish banks at all.
The figures yesterday evidence again the reliance of Irish banks on the ECB, and consequently the very weak position of the Irish government in seeking to pursue actions which are not favoured by the ECB, such as burning senior bondholders.
NAMA Wine Lake 