Central Bank Dec 2010 Statistics Indicate Ongoing Deposit Flight

The November 2010 Central Bank of Ireland stats which were discussed in this thread revealed a massive flight in deposits from the Irish banks in November 2010. A massive 70 billion EUR has left the 6 Irish banks from January 2010 to November 2010 to go abroad, and even more if you include deposit moves to foreign banks based in Ireland.

But then the IMF arrived. So what happened next?

The IMF arrival seemed to make some depositor's think that deposits in the 6 Irish banks were now safer. Others, and there are many threads here, were still pulling deposits from Irish banks post IMF arrival.

Today, we have the [broken link removed], from the Central Bank of Ireland, as to what happened after the IMF arrived. The deposit flight from the 6 Irish banks continued, as they appear, based on the statistics, to have lost more deposits.

The CBI had to advance an extra 6.1 billion EUR in liquidity to the 6 Irish banks in December 2010 alone bringing the total to 51 billion EUR in support plus 100 billion EUR+ from the ECB. It appears that this CBI support is via so-called promissory notes to back up exiting depositor's.

These stats are in line with other evidence pointing to what happened in December, like KBC saying their deposit based soared 50% to December 31st 2010 and the IMF suggesting revising the loan to deposit ratio's at the Irish banks post bailout.

More here:
http://namawinelake.wordpress.com/2...stics-indicate-no-slowdown-in-deposit-flight/

Today the Central Bank of Ireland released some information on our banks for the end of December 2010. And it appears that the CBI advanced an additional €6.4bn to the banking system in special liquidity measures (up to a balance of €51.094bn at the end of December 2010 from a balance of €44.674bn at the end of November). Reuters and the Wall Street Journal are claiming the CBI also released information today on ECB Emergency Liquidity Assistance to the end of December 2010 and both claim that ELA dropped from €136bn to €132bn but the CBI apparently did not provide a breakdown in ELA between the 20-odd domestic banks (which include the six embattled State-guaranteed banks) and the 430-odd banks in the IFSC which don’t service the Irish economy. This looks troubling because (a) the ELA totalled €138.199bn at the end of November 2010, not €136bn and (b) given the concerns over deposit flight from domestic banks, you would have thought the CBI would have gone out of its way to provide ELA figures for the domestic banks.

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There was an entry here last week which tried to examine how a continuing deposit flight would eventually undermine the banking system (both central bank and other). The conclusion was that although there wasn’t a theoretical limit to the support that could be given because ultimately the six State-guaranteed banks have only €150-200m in deposits. And although that’s a huge sum, it could theoretically be substituted by funding from the ECB. However practically that is not likely to be the case. So have the figures today confirmed that we have moved a step further to default, deposit controls and/or deposit writedown?

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Is CBI "promissory note" liquidity assistance, 'backing up' lost deposits, infinite? or will a future cash call pose problems? or have we moved a step closer to ensuring that the CBI and ECB are the only creditors left in the 6 Irish banks? or what could cause a turn around if at all possible?

Now I wouldn't claim to know much about all this but does the fact that Irish people are moving deposits abroad not mean that central bank is filling the gap and hence the Irish taxpayer will end up subsidizing those lost deposits. If so isn't moving deposits a bit of a bad move, for the nation rather than the depositor that is

Where is the Central Bank of Ireland getting 51 billion from? What happens if they do not see the 51 billion again?

The Central Bank of Ireland are now printing money to back up the flight.

http://www.independent.ie/business/...y-institution-printing-own-money-2497212.html

EMERGENCY lending from the ECB to banks in Ireland fell in December, the first decline since January 2010, but only because the Irish Central Bank stepped up its help to banks.

The Irish Independent learnt last night that the Central Bank of Ireland is financing €51bn of an emergency loan programme by printing its own money.

ECB lending to banks in Ireland fell from €136.4bn in November to €132bn at the end of December, according to the figures released by the Irish Central Bank yesterday.

At the same time, the bank increased its emergency lending by €6.4bn, bringing the total it is owed to €51bn.

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The Financial Times have stated that the deposit flight continued into December ...

Financial Times: Irish Bank Deposit Withdrawls Rose in December

http://www.ft.com/cms/s/0/8796eb78-1fea-11e0-b458-00144feab49a.html#axzz1BD5TOVTx

Ireland’s central bank increased its provision of emergency liquidity support to its domestic banking system in December, as the country’s financial crisis intensified and bank deposit withdrawals rose.

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ZeroHedgeon the ongoing deposit flight and associated money printing ...

ZeroHedge: Accelerating Deposit Flight In Ireland Forces Irish Central Bank To Print Money Independent Of ECB


http://www.zerohedge.com/article/ac...ireland-forces-irish-central-bank-print-money

It appears that Irish savers are sufficiently smart to realize that their money is no longer safe in a banking system whose existence is now only backstopped merely from referendum to referendum. As it is very unclear what will happen to the IMF/ECB rescue mechanism once the Irish election is held in March, with a material possibility that the whole plan will be unwound, leaving the country's financial system in the wind, a behind the scenes bank run is accelerating. Incidentally while this was the topic of the December letter by Guggenheim's Scott Minerd, which we discussed in a post titled "Scott Minerd's Detailed Pre-Mortem On What Europe's Bank Run Will Look Like, And Other Observations", his just released January missive deals with precisely the same topic (see chart below). So faced with the prospect of accelerating deposit redemptions, what does the Irish Central Bank go ahead and do? According to the Independent it has gone ahead and proceeded with that traditional recourse to all regimes in the bring: print money. "The Irish Independent learnt last night that the Central Bank of Ireland is financing €51bn of an emergency loan programme by printing its own money." In other words, whereas Ben Bernanke may be 100% confident that US inflation courtesy of POMO and inflation printing will be absorbed by the "massive" excess slack in the economy (oddly enough it wasn't in Tunisia, as food prices hit records despite surging unemployment), we wonder if he feels the same way about other countries in the world, which are already part of a monetary union, yet which have decided to boost the "other assets" line in their balance sheets.

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So let's do the math: ICB "money printing" has increased by €40 billion. For a country whose GDP is about €160 billion, this means that Ireland has printing the equivalent of 25% of its GDP. Put in American terms, this would be the equivalent of about $3.5 trillion in 3 months... In this context we wonder just what the ECB considers "systemically significant."

Tangentially, speaking of "other assets" we can't help by note what we observed during our last comment of the Fed's balance sheet. At $114.480 billion, it may behoove someone to inquire just how the Fed has well over $100 billion in "Other Assets" and what is contained in there. The chart below shows how this number has grown. Frankly, for all we know this could be shares of Amazon and Netflix stock. After all, these are "assets" and they most certainly are "other."

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Great piece in the Financial Times on what the Central Bank of Ireland are doing to cover the deposit flight and the associated liquidity crisis at the Irish banks:

[broken link removed]

That’s the Emergency Liquidity Assistance that the eurozone’s national central banks (NCBs) are able to provide their local banks under some legal fuzziness in the eurozone. The acronym has managed to grab a few headlines over in Ireland, but for the most part ELAs remains relatively unknown. Soo too, do the details of them.

In theory ELAs are pretty much independent since they’re not (technically) part of eurosystem operations. National central banks can offer them where and when they see fit — as long as they follow a few basic rules. For instance, the ELA has to be consistent with the EU’s Monetary Financing Prohibition. And according to ECB opinions, any ELAs extended should also be temporary, extended to illiquid institutions (not insolvent ones) and against decent collateral.

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What happens if/when the 51 billion EUR gets realised as a loss at the CBI?

Some scary numbers from Buiter. At Ireland’s central bank the ELA already accounts for 24 per cent of total assets. So even if all the capital of the Irish central bank were available to absorb the losses of the €49bn ELA, likely losses could easily wipe out the bank’s €1.5bn capital and reserves, according to Buiter. (Buiter, we should note, says the CBI is not "supposed to be able to print money".

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As for the risks as to what the CBI are up to. The FT believes:

If the Irish banks cannot borrow additional amounts from the Eurosystem using collateral issued by or guaranteed by the Irish sovereign, why are they interested in borrowing from the CBI’s ELA? At best, the liabilities of the ELA are as good (in terms of credit risk) as the Irish sovereign. Are the counterparties of the Irish banks that get paid with the liquid assets provided to the Irish banks by the ELA, under the impression that these assets are Eurosystem liabilities rather than liabilities of the informal ELA subsidiary of the Central Bank of Ireland that is not part of the Eurosystem. Why does anyone accept payment in ELA liabilities? Is it because no-one can tell the difference between an ELA deposit at the CBI and a Eurosystem deposit at the CBI?
Unsurprisingly, the name of Buiter’s latest is “ELA: An Emperor without Clothes?”

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Nama Wine Lake: Deposit flight continues unabated in December 2010, ECB data reveals

http://namawinelake.wordpress.com/2...s-unabated-in-december-2010-ecb-data-reveals/

For those of you expecting a massive inflow of deposits in December as euro deposit holders finally found religion and became confident enough to leave their money in highly regulated, stress-tested on a ferocious scale, high interest paying Irish banks will be disappointed to see that data released by the ECB yesterday showed that deposits fell €6.8bn in December (compared with a fall of €5.9bn in November). So the rate of flight which was already at an elevated level increased. The ECB does not break its figures down between the five NAMA Participating Institutions (AIB, Anglo, BoI, EBS and INBS), the six State-guaranteed institutions (the five NAMA PIs and Irish Life and Permanent) or the 20 domestic institutions (including An Post, the credit unions and foreign banks providing domestic banking services) – we do know that it excludes the 430-odd IFSC companies (MFIs) who had an additional €459.2bn on deposit. So we don’t know if an internal flight from the six “Irish” banks to local foreign subsidiaries is ongoing as anecdotally suggested – I’d be willing to bet it was.

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Bloomberg: Citi: 25% of Irish deposits withdrawn

http://www.bloomberg.com/news/2011-...-more-reasons-to-avoid-bonds-euro-credit.html

Deposits are flowing out of the system, forcing the ECB and Irish central bank to step in. Deposits fell by about 25 percent to 340 billion euros in the past 18 months, according to a report published last week by Citigroup. Support from the central bank more than tripled during the past year.

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The Examiner has a great piece on this stating that another 3% of depositor's ran away from Irish banks in December.

Irish banks saw deposits fall to €201.1 billion from €207.9bn the previous month and from €213.8bn in October.

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The problem now is that the Central Bank of Ireland itself is insolvent as a consequence of the 51 billion, hush hush, other assets, bail out of the deposit flight from the Irish banks.

The Irish Examiner article on the deposit flight is here: [broken link removed]

The Sunday Business Post in their editorial today said "a bank run has actually happened".

The flight continues.

Perhaps the banks should now start giving people a sevices such as opening .on saturdays, and staying opened until 5pm like the UK banks when people were drawing out moeny from the banks. Also stop giving our bouses to bank staff when other people have no jobs or no increase in their pay
.

We are suppose to be in this all together and now it's the banks turn to make changes to accommodate their customers.

More from Bloomberg:

Irish Private-Sector Deposits Fall

http://www.bloomberg.com/news/2011-...eposits-fall-3-billion-euros-in-december.html

Irish private-sector deposits fell 3 billion euros ($4.1 billion) in December after the government sought an international bailout to shore up its banks and public finances.

Deposits from sources including Irish households, pension funds and companies declined 2.2 percent to 168.3 billion euros, the Dublin-based Central Bank of Ireland said today.

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From a few days ago from Bloomberg:

Irish Give 51 Billion More Reasons to Avoid Irish Bonds: Euro Credit

http://www.bloomberg.com/news/2011-...-more-reasons-to-avoid-bonds-euro-credit.html

Deposits are flowing out of the system, forcing the ECB and Irish central bank to step in.

Deposits fell by about 25 percent to 340 billion euros in the past 18 months, according to a report published last week by Citigroup. Support from the central bank more than tripled during the past year.c

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More from the Irish Independent. The deposit exodus is getting worse.

Indo: Massive December 2010 Deposit Exodus

http://www.independent.ie/business/...-over-a-month-in-deposits-flight-2520899.html

AN unprecedented €40bn of deposits was withdrawn from Irish banks in December, dwarfing the flight in deposits earlier in 2010.
December's massive deposit exodus means a total of almost €110bn has been taken out of Ireland's 15 retail banks since the start of 2010.
The figures are revealed in monthly reports from the Central Bank, which show a marginal fall in lending in the year to December, as well as a €2.7bn fall in reliance on cheap cash from the European Central Bank (ECB).
The most dramatic element of the latest data, however, is the sharp acceleration in the fight of deposits from the so-called 'domestic group' of banks.
In November, the group of 15 banks lost €26.7bn and by December the monthly rate of deposit loss soared to €40.3bn.

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ZeroHedge: €40 Billion Deposit Flight In December Brings Total Irish Bank Run To €110 Billion For 2010

http://www.zerohedge.com/article/€4...mber-brings-total-irish-bank-run-€110-billion

No matter how hard the ECB is trying to mask the fact that the only way to rescue Europe is through yet another ponzi scheme, which has a CDO in its foundation no less, depositors refuse to be fooled. According to the ECB, in December Irish banks lost deposits worth €40.3 billion, over 50% more than November, when €26.7 billion evacuated the banking system. The brings the total deposit flight from Ireland's 15 retail banks to a massive €110 billion, a number which if indexed to the US, would be well in the trillions.

And as the Independent points out, "The most dramatic element of the latest data, however, is the sharp acceleration in the fight of deposits from the so-called 'domestic group' of banks." In other words, Irish banks are likely operating on liquidity fumes, and all of their operations continue to be funded on a day to day basis by the ECB and possible the IMF. And what is even worse, is that just like in the US, Irish consumer refuse to relever: "Yesterday's figures also show another contraction in banks' lending, as loans to households fell by 5.2pc and loans to non-financial companies fell 1.2pc in the year to December."

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Another great piece by Nama Wine Lake on the deposit flight:

http://namawinelake.wordpress.com/2...-in-december-2010-what-are-the-precise-facts/

CiaranT said:

Another great piece by Nama Wine Lake on the deposit flight:

http://namawinelake.wordpress.com/2...-in-december-2010-what-are-the-precise-facts/

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Some nice graphs of this here

http://economic-incentives.blogspot.com/2011/02/deposits-in-irish-banks-bank-run.html