Deposits in the Irish covered banks fell 0.8% in the month after the removal of the eligible liabilities guarantee scheme.
The removal of the guarantee coincided with the financial crisis in Cyprus and the forced ‘bail-in’ of depositors over €100,000, which caused market turbulence across the eurozone.
However, apart from a once-off reclassification of a €1.2bn life assurance deposit, deposits at the three domestic banks fell by €1.2bn in April compared with the previous month. The total level of deposits stood at €153.4bn at the end of April.
“The cumulative growth for the last 12 months [Apr 2012 versus Apr 2013] remains positive with headline deposits up €2.2bn [1.5%] year on year [or €3.4bn, ignoring the impact of the reclassification] with the pace of year-on-year growth continuing to moderate,” said the Department of Finance in a statement.
“The moderation in the rate of growth of deposit volumes is not unexpected when account is taken of the deposit gathering initiatives by the covered banks in 2012, together with the substantial completion of deleveraging programmes.
“These factors have resulted in a lower balance sheet funding requirement among the covered banks, which is supported by the return of the Covered Banks to market issuance.”
The Irish banks became heavily reliant on wholesale bank funding in the years leading up to the financial crash. They were forced to reduce their loan-to-deposit ratios over the past few years. An outflow of deposits following the removal of the guarantee and the Cyprus crisis could have derailed the banking system once again.
The latest figures also reveal that drawings from the ECB by the Irish banks fell by €100m in April. Borrowings from the ECB reduced by 40% over the past year and stood at €39.45bn at the end of April.
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