Central Bank special fund lending to Irish banks down from record €70bn

THE Central Bank lent Irish banks based in the country €66.8 billion in special funding as of March 25, down a touch from the record €70bn lent the previous month, data showed yesterday.

The banks’ reliance on funding from the European Central Bank eased to €114.5 billion compared to €116.9bn as of February 25.

Reuters said the latest statistics do not take into account the ECB’s decision to suspend collateral requirements for loans to Irish banks, agreed on March 31 after Ireland outlined plans to recapitalise and significantly shrink its lenders.

Irish banks are reliant on central bank funding due to deposit outflows and their exclusion from interbank lending markets over concerns about the sector’s future.

And Bloomberg reports BlueBay Asset Management, which oversees €27.5bn in assets, is buying Irish government bonds because pessimism surrounding the country’s finances has reached “unrealistic” proportions.

Dowding began buying Irish bonds last week after the Government said it wouldn’t penalise investors in Irish bank debt. BlueBay holds more Irish debt than the level recommended by the index it uses to measure performance, a so- called overweight position.

“Ireland’s economy has more competitive advantage compared with Portugal’s,” said Dowding.

“We like the fact that the interests of European Central Bank and European Union policy-makers are very much being observed by the new Government. A near-term restructuring of Irish Government debt is extremely unlikely."