IRISH BANKS have been receiving a temporary boost from the National Treasury Management Agency (NTMA), which has placed €19 billion of bailout funds on deposit with them.
The deposits began to be lodged with four banks in January and are comprised of €10 billion from the National Pension Reserve Fund and €9 billion in funds secured through the EU-IMF bailout.
The move has the positive effect of reducing the reliance of the banks – AIB, Bank of Ireland, Irish Life Permanent and EBS – on funding from the Central Bank and the European Central Bank.
Figures published by the Central Bank yesterday showed it reduced its level of “exceptional liquidity assistance lending”, or emergency funding, to Irish banks from €66.8 billion to €54 billion over the course of April.
The equivalent figure in February was €70 billion. ECB numbers also show a decline in its supply of emergency funding to Irish banks, with loans falling from almost €115 billion to €106 billion over the same month.
The NTMA’s cash will, however, be withdrawn again at some stage before the end of July, at which point it will return to the banks as capital under a planned €24 billion recapitalisation.
The €24 billion figure arose after the Central Bank completed aggressive “stress tests” on the banks in March.
The Government hopes that about €5 billion of this can be raised through imposing losses on subordinated bondholders or by selling assets.
“The deposits in the aggregate amount of €19 billion are being lodged with the banks that were subject to the 31st March 2011 stress tests.
“On or before 31st July, 2011 the deposits will be returned to the State to provide the funds necessary for the 31st July recapitalisations,” the NTMA said in a statement.
The alternative to placing the €19 billion with the four banks would have been to lodge it with the Central Bank, an option which, it is understood, would have delivered a lower return for the NTMA.
A spokesman declined to say how much interest was being paid to the NTMA under the arrangement with the four banks. Equally, he declined to confirm how the €19 billion had been split between the banks.
