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News : Irish Economy Last Updated: Dec 30, 2010 - 2:54 PM

Central Bank says lending to Irish households and businesses fell again in November; ECB lending to banks rose by €11.7bn in to €97.3bn
By Finfacts Team
Dec 30, 2010 - 2:49 PM

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The Central Bank reported today that lending to Irish households and businesses fell again in November.  European Central Bank (ECB) lending to banks rose by €11.7bn in November, bringing the total borrowed to €97.3bn.

The annual rate of change in loans to households was minus 4.8% in November 2010, following a similar annual decline in October. Lending for house purchase was 1.7% lower on an annual basis in November 2010, whereas lending for consumption and other purposes had declined by 15.6%.

The net flow of household lending during the month of November 2010 was minus €193m, following a revised net monthly flow of minus €783m in October. Underlying the negative net monthly flow of household loans in November was a contraction of €212m in loans for house purchase. Consumer loans declined by €71m, whereas lending to the household sector for other purposes, which would include lending to partnerships, sole traders and individuals for investment purposes rose by €19m. The rise in ‘other’ lending was due to a combination of interest capitalisation on developer loans and newly sanctioned loan draw-downs.

The monthly net flow of loans to households averaged minus €418m in the three months ending November 2010, which consists of an average net flow of minus €163m in loans for house purchase, minus €272m in consumer loans and €17m in lending for other purposes.

Lending to the non-financial corporate (NFC) sector declined by 1.9% in the year ending November 2010, following a revised annual decline of 1.8% in October. There have been revisions to the April 2010 data, which have now been reflected in the transactions and growth rates for loans to NFCs. These have generally led to lower rates of contraction in NFC lending than in previous releases of the data.

In aggregate, NFC loan repayments were €184m greater than draw-downs during November. The monthly net flow of loans to NFCs averaged minus €308m in the three months ending November 2010.

Developments in loans to NFCs during November saw a rise of €25m in shorter term loans with an original maturity of up to one year being more than offset by a decline in medium and longer term loans of €10m.

Developments in loans to NFCs during November saw a rise of €625m in shorter term loans with an original maturity of up to one year being more than offset by a decline in medium and longer term loans of €810m.

NFC loans with an original maturity of over five years continue to have the most significant contraction on an annual basis; falling by 8.7% in the year ending November 2010. Short-term NFC loans up to one year maturity, which would include the use of overdraft facilities, were 8.3% higher in November 2010 on an annual basis.

Credit institutions’ holdings of debt and equity securities issued by the Irish private sector rose by €5.3bn in November 2010. The increase during November mostly relates to a rise in the holdings of debt securities issued by other financial intermediaries (OFIs), most notably debt issued by the NAMA SPV (special purchase financial vehicle) in purchasing land and development loans from participating institutions. The NAMA transfer process has also been the main factor in the year-on-year growth rates of credit institutions’ holdings of OFI debt securities, which reached 51.2% in November 2010.

Deposits and other funding

Deposits from the Irish resident private sector were 6.7% lower on a year-to-year basis in November 2010. The annual rate of change in deposits from Irish households was minus 4.5%, whereas deposits from Irish NFCs fell by 14.9% on an annual basis in November. Deposits from OFIs and insurance corporations and pension funds (ICPFs) declined by 4.3% over the period.

There was a negative net monthly flow of Irish resident private-sector deposits during November totalling €5.2bn, bringing the three-month average net flow to minus €2.1bn. This is in comparison to an average net monthly flow of Irish resident private-sector deposits of minus €677m in the three months ending October 2010. The negative net monthly flow of Irish private-sector deposits in November was primarily due to a fall in household and OFI/ICPF deposits.

Total overnight deposits from the Irish private sector were 5.3% lower on an annual basis in November 2010.

Private-sector term deposits with agreed maturity up to two years, declined by approximately €2bn during November, mostly due to households reducing their deposits in this category. Total private-sector deposits in this category declined by €10.8bn, or 14.8% in the year ending November 2010.

Credit institutions’ borrowings from the Central Bank as part of Eurosystem monetary policy operations (including IFSC companies) increased by €8.2bn in November 2010, to €138.2bn. Domestic market credit institutions2 accounted for €97.3bn of this outstanding stock, an increase of €11.7bn during the month.

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