Move by Irish banks to access extra funds

FOUR IRISH banks have engaged in a technical manoeuvre which will allow them to access additional funding from the European Central Bank.

In a move which highlights the increasing dependence of Irish banks on ECB liquidity, Bank of Ireland, AIB, Irish Life and Permanent and the EBS have registered close to €20 billion in own-use Government-backed uncovered bank bonds to be used as eligible collateral for European Central Bank funding.

Last April the ECB announced it was tightening its requirements for the collateral it accepted from banks from January 1st last.

It said it would no longer accept securities in currencies other than the euro as collateral in repurchase operations, or debt instruments traded on the accepted non-regulated markets.

The move, which has been backed by the Irish Central Bank, is essentially a technical device which will have no effect in terms of the balance sheets,

Bank of Ireland has listed four issues totalling just over €9 billion, Irish Life and Permanent has issued approximately €3 billion, while the EBS has listed €1.7 billion. It is believed that AIB may have issued up to €6 billion in total.

Irish Nationwide engaged in a similar exercise last September when it essentially issued €4 billion in debt to itself.

Bank of Ireland’s issue replaces securitised notes that are denominated in sterling and are backed by Bank of Ireland’s UK mortgage book.

The short-term bonds, which are Government-guaranteed, will allow the institutions to draw fresh funding from the ECB, and will replace collateral that would not have been accepted by the ECB.

Ireland’s increasing dependance on ECB liquidity to fund its banks is believed to be one of the main triggers for the Irish IMF-EU bailout in November.