Flight of private sector deposits from State-supported Irish banks continues to slow in October 2011

The Central Bank of Ireland (CBI) has released its monthly snapshot of the state of Irish banks focussing on deposits and lending. The data covers the period up to 30^th October 2011 and shows that during the month of October 2011, deposits by ordinary households and businesses continued to decline at the so-called “covered” or State-supported banks – essentially the two pillar banks, Bank of Ireland and AIB, and also Permanent TSB. But the €255m decline in private sector deposits in October 2011 is one of the smallest declines in the past year, which has seen a massive €23bn of private sector deposits “fly” from the covered banks – this represents an 18% annual decline from €125bn to €102bn. The monthly decline of €255m is greater than the €133m decline in September 2011, but it is small change compared to the €3.4bn monthly decline back in November 2010. Looking at the figures below, I think it’s fair to say that the flight of deposits is continuing to slow. Indeed, the decline in deposits may not have anything to do with confidence in Irish banks but may just reflect the economic reality of there being less spare cash to place on deposit.

Deposits overall in the covered banks rose for the fourth month running; and by a healthy €1.3bn during the month of October 2011. The increase is entirely due to deposits by MFIs, Monetary Financial Institutions (see below).

The CBI doesn’t provide an analysis of private sector deposits at the covered banks – about the only analysis it doesn’t provide! – but in terms of all banks operating in Ireland including foreign and IFSC banks, Irish household deposits increased by €140m in October compared with a €500m increase in September; ordinary Irish company deposits rose by €340m compared to a fall of €210m in September. Total deposits from all sources in all Irish banks fell €3.3bn in October, mostly as a result of depositors outside Europe removing deposits. Could this be a reflection of doubts in the immediate future of the EuroZone?

Here is the full set of deposit statistics for the different categories of bank operating in Ireland.

First up is the consolidated picture for all banks operating in Ireland including those 450-banks 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 or “covered” financial institutions (AIB, Anglo, Bank of Ireland, EBS, Irish Life and Permanent and INBS – Anglo and INBS have now been merged to form the Irish Banking Resolution Corporation, IBRC)

(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 outside Europe)