Irish banks are safe, says agency

CREDIT ratings agency Standard & Poor’s does not expect Irish banks to be affected by the liquidity problems that have crushed Northern Rock.

The agency said it has reviewed the liquidity status of the rated Irish banks and concluded that they remain “satisfactorily positioned” and have been successfully managing the more difficult market conditions.

“All Irish banks have experienced a rise in their wholesale funding needs in recent years, driven by a sustained period of high credit growth.

“The result is that Irish banks do have a relatively high reliance upon wholesale funding compared with most banking systems,” said Standard & Poor’s credit analyst Nigel Greenwood.

“However, the banks are seeing the benefit of the significant efforts that have been made to diversify funding sources and to lengthen the maturity profile of their debt.”

The analyst said Irish banks are comfortably managing their liquidity requirements while their loan growth is expected to slow from recent high levels.

Mr Greenwood said though short-term wholesale funding remains scarce, access to interbank deposit markets appears sound and there remains some access to most commercial paper markets.

“In addition, the ability to pledge eligible mortgage assets with the Central Bank gives us comfort as it provides a further source of funding. Finally, usage of securitisation is more modest than at some UK peers,” added Mr Greenwood.

S&P found that Irish Life & Permanent and IIB Bank have the highest reliance upon wholesale funding. The agency said it was “comfortable” with their respective liquidity positions.