It is concerning to see that Irish banks appear to have passed up on the opportunity to avail of the full €8Bn in cheap funding offered by the European Central Bank for onward lending to individuals and businesses within the Irish economy. Of particular concern is the demand for credit from viable SME’s that is very obviously not being met by lending institutions.
The ECB’s €400Bn four year liquidity programme announced in June became available for draw down yesterday, Ireland’s share of this fund has been estimated at approximately €8Bn. The mechanism of this TLTRO programme is that member state banks can avail of a portion (7%) of their qualifying loan books on the condition that these funds are loaned on to Businesses (excl. financial intermediaries & mortgages) and Consumers (excl mortgages).
There is no breakdown available of the actual amount of this funding drawn down by the qualifying Irish banks but early estimates put it at around 20% of their entitlement, this means that 80% or €6.4Bn of funding at 0.15% was not availed of.
The problem arises during phase 2 of this TLTRO scheme, this is set to be significantly greater than the original €400Bn, any funding offered by the ECB under phase 2 will be a multiple of net new lending created by the application of phase 1. The upshot is that by not fully availing of this scheme Irish banks are not only denying immediate access to cheap credit by Irish business but they are also hampering the future competitiveness of Irish companies by shunning the opportunity to significant cheap funding in the future.
There will be a second and final offering of phase 1 funding on 11th December, this is the final opportunity Irish banks will have to avail of this scheme.
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