Deposits fall €15bn but Central Bank reliance rises

DEPOSITS held by Irish banks fell by €15 billion to €168.3bn last year, figures released by the Central Bank yesterday reveal.

And the Money and Banking Statistics: December 2010 statistics show that while Irish bank’s dependence on funding from the European Central Bank fell by €2.8 billion to €94.6bn at the end of December, the bank’s reliance on the Irish Central Bank’s exceptional liquidity assistance facility rose to €51bn from €44.7bn at the end of November.

Goodbody Stockbrokers Dermot O’Leary told Bloomberg: “Until we see a stabilisation of deposits, the banks are going to be increasingly dependent on either the European Central Bank or the Irish Central Bank for funding”.

Commenting on the data set Bloxham chief economist Alan McQuaid said there is very little good news in these latest banking figures, with the annual rates of decrease for the main loans to the household sector continuing to rise in December, and no sign that the trend will change any time soon.

“Meanwhile, the outflow in deposits is another cause for concern. Getting the banks back to some sort of ‘normal’ lending practices should be the key objective of a new government.

“Until the banking sector crisis is fully resolved and things improve on the labour market front then the supply/demand for credit will remain subdued in our view, severely hampering the recovery prospects for the economy as a whole in the process,” he said.

Outstanding loans to the private sector rose 7.1% in December from a year earlier, data from the central bank showed loans to households continued to weaken.

Loans to households fell 5.2% in December from a year ago, a sharper drop than November’s 4.8% annual rate of decline. Lending for consumption and other purposes dropped 16.6%. Irish private sector deposits were 7.6% lower from a year ago compared to a 6.7% annual decline in November.

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