Banks pull back on foreign lending

STATISTICS FROM the Central Bank show that Irish domestic banks continued to pull back on foreign lending in 2011, with a 26 per cent decrease reported over the 12 months to December 2011. The statistics also indicate that foreign lending has become increasingly concentrated on the UK market.

Foreign claims fell by € 11.6 billion to €143.5 billion from the third to the fourth quarter of 2011, signalling a continued retrenchment from foreign markets for Irish banks.

According to the Central Bank, the reduction is expected, “given that the domestic banking groups are downsizing their operations abroad, including the disposal of overseas units”.

The most significant decline was in lending to the US, which dropped off by 45 per cent in the fourth quarter, down to € 7.9 billion. The US now accounts for 6 per cent of total foreign claims.

Claims on the UK fell by 2.4 per cent in the fourth quarter, but it remains the largest destination for cross-border lending by Irish banks, ahead of the US, with total claims of €106.2 billion, accounting for 74 per cent of total lending. Indeed foreign lending by Irish banks has become increasingly focused on the UK market. When the series was launched by the Central Bank in September 2010, the UK only accounted for 57 per cent of total foreign lending.

Lending to Spain fell by 3.6 per cent in the fourth quarter to €3.8 billion, accounting for 3 per cent of the total and by 2 per cent to France to € 4.3 billion, which also accounts for 3 per cent of the total. Foreign claims on Germany fell by 3.3 per cent to € 2.4 billion. It represents 2 per cent of total foreign claims.

The private sector accounts for 79 per cent of claims.