Figures released by the Central Bank of Ireland (CBI) this morning for the month of June 2011 show that the flight of private sector deposits from domestic Irish banks continued in the month of June, though at a lesser rate than during the more tumultuous months of the past year. In total terms for all Irish banks – the six State-guaranteed banks, the local branches of foreign banks and banks in the IFSC which don’t service the Irish economy – deposits fell by 1.5% or €9bn from €601bn to €592bn.
The CBI produces a mountain of figures each month – the focus on here is the total of private sector deposits in the six State-guaranteed banks, based on the belief that ifIrelandis to recover and develop a sustainable banking system, then companies and households will need to have the income and confidence to place deposits in Irish banks. In June 2011, private sector deposits in the State-guaranteed banks dropped by 3.6% from €107.5bn to €103.5bn. That’s the biggest monthly drop since last November 2010 when the IMF/EU bailout was agreed, and the second biggest monthly drop since September 2008 when the financial crisis blew up. Not good.
The CBI now produces monthly figures on savings and loans which analyses deposits in considerable detail – see here for the list of Excel spreadsheets available. Household deposits in all Irish banks (including foreign banks and credit unions) increased very slightly in the month from €92.133bn to €92.215bn. The overall loss of deposits inIreland has been generated by companies.
The CBI and ECB continue to provide substitute funding for Irish banks which replaces this flight of deposits and Irish banks continue to provide extensive State-backed guarantees on deposits.
So, looking at the deposit figures produced by the CBI. First up is the consolidated picture for all banks operating in Ireland including those based in the IFSC which do not service the domestic economy.
Next up are the 20 banks which do service the domestic economy and include local subsidiaries of foreign banks like Danske, KBC and Rabobank. There is a list of all banks operating in Ireland here together with a note of the 20 that service the domestic economy.
And lastly the six State-guaranteed financial institutions (AIB, Anglo, Bank of Ireland, EBS, Irish Life and Permanent and INBS)
(1) Monetary Financial Institutions (MFIs) refers to credit institutions, as defined in Community Law, money market funds, and other resident financial institutions whose business is to receive deposits and/or close substitutes for deposits from entities other than MFIs, and, for their own account (at least in economic terms), to grant credits and/or to make investments in securities. Since January 2009, credit institutions include Credit Unions as regulated by the Registrar of Credit Unions. Under ESA 95, the Eurosystem (including the Central Bank of Ireland) and other non-euro area national central banks are included in the MFI institutional sector. In the tables presented here, however, central banks are not included in the loans and deposits series with respect to MFI counterparties.
(2) NR Euro are Non-Resident European depositors
(3) NR Row are Non-Resident Rest of World depositors (ie outsideEurope)
NAMA Wine Lake 
You write
“In June 2011, private sector deposits in the State-guaranteed banks dropped by 3.6% from €107.5bn to €103.5bn. That’s the biggest monthly drop since last November 2010 when the IMF/EU bailout was agreed, and the second biggest monthly drop since September 2008 when the financial crisis blew up. Not good.”
But the underlying situation is not at all as bad as that. From the CB statistical release of today I read “Excluding the impact of movements in intra-group deposits (i.e. deposits from affiliated non-credit institutions) there was an underlying decline of approximately €1.8 billion in Irish resident private-sector deposits during June”
@Tom, thanks for that. There is a mountain of deposit information released by the Central Bank each month, even before taking account of the new reporting on deposits that was introduced last month.
The Central Bank reports on banks at three levels (1) ALL banks operating in Ireland which includes credit unions, the six State-guaranteed banks, local branches of foreign banks like Rabo and Danske and the banks located in the Irish Financial Services Centre which don’t service the domestic economy but are really here for tax/regulation reasons though there is a base of knowledge and facilities here as well (2) A subset of the first group is the 20 banks and the credit union sector which do service the domestic economy and this includes the six State-guaranteed banks, local branches of foreign banks like Rabo and Danske and (3) A subset of the second group which is just the six State-guaranteed banks.
The Central Bank reports on deposits at different levels eg those held by IFSC banks which don’t service the domestic economy, households, businesses, non-resident deposits, deposits by financial institutions.
So from this mountain of data, what are the most important indicators for those looking at the health of our economy?
The view on here, and it’s open to debate, is the level of deposits from ordinary households and businesses in the six-State guaranteed banks.The reason for this view is that in the longer terms our banking system will only be sustainable if households and businesses have the confidence and income to deposit with our own banks (effectively AIB, Bank of Ireland and Irish Life and Permanent).
So each month, the figure highlighted on here is the private sector deposits in the six State-guaranteed banks (AIB, Anglo, BoI, EBS, ILP and INBS). It would be helpful if the Central Bank produced detailed deposit information on this data but it doesn’t – the detailed data is for all banks. With an accountant’s hat on, I have queried the data produced by the Central Bank for Category (3) banks and the responses have not convinced me that there is a better indicator of deposit health than the one produced here.
I am open to change my opinion if there is a convincing reason for “Excluding the impact of movements in intra-group deposits (i.e. deposits from affiliated non-credit institutions)” on the deposit figures shown.
Looks like it is going to be very crowded in Switzerland.
http://dealbook.nytimes.com/2011/07/28/debt-ceiling-debate-rattles-short-term-credit-markets/?pagemode=print
I’m not an analyst of bank deposits but has anyone factored in the effect on the the deposits when the DoF moves the bank recapitalisation funds currently on deposit on to the balance sheets?
@WSTT, at the end of June there was €21bn approximately on deposit by the Government (through the NTMA mostly) with the six State-guaranteed banks. So €21bn of cash as an asset and €21bn of deposits as a liability. If €18bn of this is used to recapitalise the banks then cash will remain the same, deposits will reduce by €18bn and capital will increase. What’s the effect?
1. Our banks get capitalised to what is considered a healthy level.
2. Loan to deposit ratios will be restored to their high-ish levels and will again emphasise the job that lies ahead in deleveraging the banks
3. There will be a spike in funding from the ECB (and to a lesser extent Central Bank of Ireland) as the banks will need fresh funding to cope with day to day activity.
4. Bondholders will be in a stronger position to argue that haircuts should not be imposed on them as the banks are now “solvent”
5. There is practically an irreversible acceptance by the Government of Ireland for the private debt of banks
It is appalling what is being inflicted on the Irish people arising from the recapitalisation of the banks; the non-payment of debts incurred by the mega-borrowers; and the preservation of bondholders.
All this on top of a need to rein in a massive exchequer deficit.
It is just not possible to do all this with a projected debt/gnp ratio of about 140%.
The household deposit figures perhaps reflect holiday pay and other summer bonus payments.
It is also worth noting that the level of household debt only declined very marginally in June. It has been suggested fairly widely that a reasonable amount of deposits have been drawn down to pay off debt, in particular debts of family members such as children with large mortgages.
At the present rate of paying off household debts it will take us forever to get down to the Eurozone average.
@ Niall
If my memory serves me correctly, you suggested in an early post that an Autonomous Region like Castilla Leon, very poor, was an exception with its dramatic budgetary woes because Spain contains a duality in terms of regional wealth. Cataluna is the second wealthiest region of Spain after the Basque region. I think we can safely say that all of Spain is in dire straits.
There is reason why the bond vigilantes are attacking.