Thursday, September 1, 2011

Central Bank Funding stays at €125 billion

Today’s release of the Money, Credit and Banking Statistics by the Central Bank gives us a glimpse into the performance of the banking sector.  One key measure is the reliance of the covered banks (BOI, AIB (+EBS), PTSB and IBRC (Anglo + INSB)) on central bank funding.  This peaked at around €155 billion in February but fell to below €130 billion two months later and has been steady since then.

Central Bank Funding

The mix has been changing slightly.  Since April funding from the European Central Bank’s Main Refinancing Facility has fallen from €74 billion to €68 billion. At the same time funding sourced through the Central Bank of Ireland’s Emergency Liquidity Assistance has risen from €54 billion to €57 billion.

As the collateral requirements for the ECB are higher this suggests that the quality of the collateral offered by the banks has been falling.  The interest rate on the ECB funding is 1.5% while the money received through the ELA is thought to carry an interest rate of around 3.0%.

1 comment:

  1. Does this mean that the ICB will earn 3% margin on the Approx €57 billion or will it have to 'buy' this money from the ECB at 1.5%.
    If it is 3%, then a nice liitle profit of 1.5 billion pa. Nothing wrong with that.
    Especially when I just got a flier from BOI, increasing overdraft rates from 12.5% to 13.5%.