IRISH-BASED financial institutions had borrowed €39.4 billion from the European Central Bank (ECB) through its funding system at the end of 2007, 45 per cent more than a year earlier, according to figures provided by the Irish Financial Services Regulatory Authority.
Total borrowing from the ECB by European financial institutions rose by a slightly lower percentage, 41 per cent, in 2007 to €637 billion, from €450.5 billion a year earlier, according to the regulator's figures.
The ECB provides money to European banks through its "repo" facility on a constant basis to improve liquidity in the European banking system.
The percentage borrowed by Irish financial institutions, which include international banks based in the IFSC in Dublin, rose to 6.2 per cent of ECB borrowing by European banks in 2007, from 6 per cent at the end of 2006.
Some Irish financial institutions use the ECB facility on a regular basis to finance part of their balance sheets, using their residential mortgage assets as collateral. All banks regard the facility as a continuous source of funding.
Some European banks have borrowed more heavily from the ECB, particularly towards the end of 2007 when the cost and availability of funding in the international money markets was at its worst due to the credit crunch.
The cost of interbank funding reached its peak in mid-December, prompting some European financial institutions to rely more heavily on ECB funding to tide them over the end-of-year period.
EBS building society said on Wednesday that it had borrowed €2.3 billion through the ECB repo facility in the final months of 2007 - accounting for 12 per cent of its total funding at the end of the year. It had no borrowings from the ECB at the end of 2006.
Irish Life & Permanent (IL&P) said at its 2007 results presentation last month that it had drawn €5.3 billion from the ECB by the end of the year but had since reduced this figure to €4.6 million.
The group said it could have drawn up to €17 billion from the ECB at the end of 2007, but had only accessed just over a third of this. A spokesman for the group said yesterday there had been "no material change" in the level of ECB borrowings since last month.
Bank of Ireland said last month that it borrowed ECB weekly and monthly funding "on an ongoing basis as business as usual", but had not accessed ECB overnight funding through what it described as the Frankfurt-based bank's "emergency window". Neither AIB nor Anglo Irish Bank has accessed funding from the ECB.
One London analyst expressed concern last month that IL&P was "using the ECB as an alternative funding source rather than a lender of last resort". IL&P chief executive Denis Casey described the concern as "a typically UK view of the world" reflecting the different stances of Bank of England and the ECB.
A senior Irish banker said yesterday: "ECB repo borrowing is a normal activity in the market. For it to be inferred in any other way is market ignorance."
Ratings agency Standard & Poor's (S&P) yesterday downgraded its outlook on IL&P from stable to "negative" but reaffirmed its credit rating because of the group's strong mortgage portfolio.
Goldman Sachs said in a report yesterday that IL&P was undervalued by about 70 per cent.
