Banks cut reliance on ECB funds

Irish banks’ reliance on ECB funding continued to fall last month, hitting the lowest level for five years.

New monthly data — published yesterday by the Department of Finance — showed total use of ECB facilities by all Irish- based banking institutions amounted to €43.6bn in July, down by about €2.5bn or 5% on the previous month. July’s reading was the lowest monthly level measured since Sept 2008.

Compared to the same month last year, ECB funding amongst all Irish-based banks was down by 45%, or €36.4m.

ECB reliance amongst the Irish lenders is now down by nearly 70% — or just under €93bn — on the peak of €136.4bn, which was reached in Nov 2010.

Taking the main ‘covered’ banks — AIB, Bank of Ireland, and Permanent TSB — alone, use of ECB funding declined by €900m, or 2.6%, on a monthly basis in July.

“The continued decline in ECB borrowings reflects a reduction in the balance sheet funding requirement within the covered banks in recent months,” said the department.

On a year-on-year basis, the covered banks’ ECB borrowings fell by €27bn, or 44%, to stand at €33.87bn at the end of July.

“The steady decline in reliance on ECB funding reflects the continued strengthening of the banking system and has been achieved through managed de-leveraging, deposit gathering and the return of AIB, Bank of Ireland, and Permanent TSB to international funding markets,” said the department.

Meanwhile, deposit volumes at the main banks, remained stable during July, coming in at around €152.1bn. The flat month- on-month reading was, according to the department, due to “seasonality effects, with activity moderating across the sector over the summer months”.

On a year-on-year basis, deposit volumes were slightly down in July, falling by 1.5% or €2.3bn. The department said this was largely expected, given the deposit gathering initiatives by the covered banks last year and the substantial completion of their de- leveraging programmes.

It said an insignificant impact on deposit volumes continues to be seen as a result of the ending of the ELG scheme for new liabilities as of the end of last March.