IRISH BANKS increased their dependence on emergency funding from the Central Bank last month, but the amount of money loaned by the European Central Bank to Irish banks fell.

Figures released by the Central Bank yesterday, show that it provided €51.1 billion in “other assets” to Irish financial institutions in December, the vast majority of which is believed to refer to emergency liquidity assistance forwarded to the banks.

This is 14.3 per cent higher than the €44.7 billion provided in November.

The sharp increase – though smaller than the 29 per cent jump between October and November - may indicate that Irish banks are relying more on funding that is guaranteed against riskier capital, as emergency liquidity assistance generally accepts riskier loans than those accepted by the ECB as collateral.

The data also shows that the level of funding provided by the ECB to Irish banks fell by 4.4 per cent in December, down from €136.4 billion to €132 billion.

While, on average, demand for ECB liquidity from euro-zone banks has been falling over the last year, the Republic’s banks have been steadily increasing its reliance on ECB support.

It is believed that ECB concern about the level of financial support it had been providing to Irish banks was one of the main triggers for the Irish EU-IMF bailout.

While yesterday’s figures suggest that Ireland may be weaning its way off ECB liquidity, the figures include both domestic institutions and international banks with operations in Ireland, so it is unclear whether the troubled domestic banks have reduced their dependence on ECB liquidity.

It is believed that the Central Bank’s emergency liquidity assistance provisions have to be sanctioned by the ECB.

Irish banks’ increasing reliance on ECB and emergency funding from the Central Bank is indicative of the funding difficulties facing Irish banks, as they struggle to raise funds privately, and are faced with dwindling deposit levels.