FIVE IRISH banks have reported a deterioration in funding in the final quarter of 2011.

They also expect little change for the first quarter of this year, according to the latest quarterly survey of bank lending in the euro zone.

The banks, which were not identified, said they did not make it any more difficult for businesses to secure credit in the final quarter of 2011 but that there were further declines in demand for new business loans.

Demand for loans from business is expected to continue to decline in the first quarter of this year and the recent pattern of unchanged credit standards will also continue, the survey said.

Banks made it harder for customers to borrow residential mortgages in the final quarter of last year and the banks anticipate further tightening in their criteria for new loans in the first quarter.

Demand for mortgages fell due to concerns about the prospects for the housing market and lower consumer confidence.

There was some easing on mortgage interest margins but this coincided with more restrictive loan-to-value ratios on new mortgages.

Demand for consumer loans and other credit declined further, despite unchanged credit standards in the final quarter of 2011.

Confirming the results of deleveraging and recapitalisation, the banks reduced their risk-weighted assets – loans against which they must set aside capital – and increased in their capital positions in the second half of 2011.

Banks expect their access to short-term retail deposits also to deteriorate further in the first quarter of this year.

Lenders were more optimistic about raising funding by selling on house loans to debt investors in securitisation deals than on other types of funding.

The banks reported no impact on funding or credit standards from the recent tension in the European sovereign debt markets.

At a euro zone level, the European Central Bank found that a quarter of banks expect to make it harder for companies to secure loans, but the ECB’s injection of low-cost loans had eased the chance of a full-blown credit crisis.

The ECB has said that 523 institutions borrowed €489 billion in the December auction of three-year loans but that the increase in liquidity was €193 billion as banks swapped loans to three-year money from shorter-term debt.

The survey found that more than a third of banks tightened criteria for companies seeking loans in the final quarter of 2011 and they expect demand for business loans to decline as the euro area moves closer to a new recession.