Figures released by the Central Bank of Ireland (CBI) today show that in the month of September 2012, the reliance by Irish banks on central bank funding was flat. Lending by central banks to Irish banks comprises lending directly from the ECB and lending from the CBI and stood at €119.7bn at the end of September 2012, the same as August 2012. Lending directly from the ECB remains at €79.1bn and lending from the CBI to Irish banks, which is mostly known as “Emergency Liquidity Assistance” or ELA remains at €40.6bn.
What does this mean for Irish banking and the wider economy? If our banks are to return to some degree of normality, they will rely more on deposits from customers and also lending from other banks, and less on central bank funding. There has been a downward trend in central bank funding since December 2011, when the ECB decided to make up to €1tn available to EuroZone banks for three year lending. Overall the trend in Irish banks has been positive since the start of 2011 but we are still back at August/September 2011 levels of ECB funding.
It is worth pointing out that ECB direct lending to Irish banks today stands at €79.1bn. This compares with a €3tn ECB balance sheet, and indicates that Irish financing arrangements are now proportional to our economy, and that the ECB is no longer providing “unprecedented” support to Irish banks. Last month, the Irish Department of Finance said that Irish banks now account for 5% of Eurozone lending.
We will get deposit information on Irish banks for September 2012, at the end of October. Deposit analysis for Irish banks for August 2012 is available here.