New Data on Loans and Deposits

The Central Bank has continued its excellent work in making more statistical data available with two new releases “Trends in Business Credit and Deposits” and “Trends in Personal Credit and Deposits“. I don’t have time to get into a detailed discussion of these releases but, on a quick look, there appears to be lots of new and interesting information in these releases.

22 thoughts on “New Data on Loans and Deposits”

  1. Perhaps giving credit for cars , houses etc and the businesses that supply this household consumption is net energy negative.
    Since the privatisation or semi- privatisation of utilities that now seek a profit on fixed assets very little resourses go into building core wealth.
    This credit mirage like many such optical illusions happen in dry deserts which often have large liquid fossil fuel resourses under its bedrock.
    http://www.youtube.com/watch?v=zip1YmFKKtE

    Credit is only useful for innovation & core wealth creation – credit for consumption or consumption oriented business suppliers is a Ponzi.
    The last 30 – 40 year growth experiment did not factor the depletion genie into its model bottle.

  2. I woud like to see these numbers linked to the mortgage arrears data published by the Financial Regulator. It would be interesting to see what types of mortgages (fixed, variable or tracker) make up the arrears cases. I would guess that variable rate mortgages are more susceptible to arrears given the recent rate increases.

    It is also noticeable that there is a shift out of standard rate mortgages and into fixed rate mortgages.

    The balance on tracker loans fell by 0.8% in the quarter. As these are no longer being issued we can assume that most of this is because of repayments. It is hard to imagine tracker rate customers switching to fixed rates and very unlikely they would switch to variables rates.

  3. Austerity is completly pointless if it goes to fill the credit black hole.
    Its akin to hoping a Bucket will fill even if it has a great big hole in the bottom.
    The solution to this problem is simple but the solution would entail the complete destruction of Irish retail banks and thus would have obvious consequences to more powerful banks abroad.
    These banks are prepared to destroy everything so that they can be on top of this stinking steaming dung pile.
    It seems contary to what that Jesus bloke said the Banks shall inherit the Earth.
    The money supply needs to be divorced from non productive “assets” that serve no other purpose other then rent vehicles.
    It seems we are about to test stupididty & Greed to destruction.

  4. @DoC

    What solution are you advocating which would destroy the banks – again?

    I thought they had managed that process perfectly well already.

  5. @Yields or Bust
    The banks are perhaps a bit more like the living dead now – rationally they should die but are being animated by some dark force.

    People hold declining credit deposits in these zombie banks – this could be transfered to post office accounts since these credit deposits are already Guaranteed by the state.
    This will finance the state internally at least for a period – the London boys could not speculate on this debt (thats why we often hear laments from the financial sector that the Japanese post office should be privatised)

    Mark down ALL PRIVATE LOANS to whatever leverage ratio they are to Goverment debt.
    lets say it is 20% – all mortgages & private loans pay 20% of what they once payed – All risk deposits get this loan portfolio – so effectivally the ECB takes a massive haircut.
    This will free up a huge amount of spending power from the consumer that may drive unsustainable import inflation.
    Tackle this by taxing imports that do not threaten life & limb.
    Given our crazy personel transport culture that is one of our biggest imports I would dramatically increase taxes on cars and to a lesser extent petrol & diseal.
    This will dramatically increase our trade surplus while freeing up internal income for internal commerce.
    If this cannot be done its better to press the Punt button which will replicate the above to a certain extent.

  6. PS – a state industrial bank could finance / credit for industrial & utility projects starting with medium scale projects such as Sugar / ethanol plants , smaller peat stations – gaining expertise for future larger scale endeavours.

    The housing market can remain a cash market – hyperinflating non wealth creating assets is irrational at best.

  7. @DoC

    Interesting – in the sweet Jesus sense – you’ll understand.

    And the difference between Govt Guaranteed Post Office savings and Govt Guaranteed Deposits in a State owned bank is what exactly?

    And by the way what happens to the said banks in this scenario other than the additional ECB funding to replace lost deposits requirement? What if the ECB says no more funding what happens to those depositors who haven’t moved their cash over to the POs? Presumably the Govt Guarnantee is worthless in that scenario – or do the Govt just simply raid the POs?

    How would one calculate the leverage ratio as you noted? Presumably the ECB is kept in the dark re this project at all times – an 80% haircut is pretty chunky?

    The import duty regime works both ways of course, and presumably breaks all manner of international trade agreements and EU law – how confident are you in the dramatic increase in the trade surplus as a result?

    Did DeValera not try this internal commerce gig before?

    Like the idea of writing down debt to a more sustainable level but the basis in my mind has to bear some form of reality with asset earnings reality – which at the moment in terms of real estate is clearly not the case nor will it be for some time – the CBI believes it will be 2040 by all accounts.

  8. @Yields or Bust
    Why are deposits declining ? – it is to pay interest on externally owned sovergin & pseudo sovergin debt.( deposits are subtracted to pay tax which travels to interest income )
    If we own our own debt this can recycled withen this juristiction rather then be subtracted.
    Sovereign debt is money while credit money is leverage.
    I would envisage a movement of the entire credit deposits to state coffers over a weekend with the remaining risk deposits left holding the assets.
    Essentially the credit deposits will become money in a instant while the risk deposits remain loans.
    The leverage ratio is easily calculated – its the total outstanding private debt withen this juristiction divided by the amount of goverment money.

    The De Valera thingy could not work in the past for various reasons but primarily because European & American entities had access to vast oil wealth which they could turn into credit at will.
    Even if we had a Japanese style work culture we could not internalise trade/wealth – Lemass merely recognized reality.
    I am merely asking that others recognize the new reality of static or declining oil production/consumption – this means countries cannot farm credit / oil inputs like they did in the 20th century.
    We will have to build internal wealth , modestly at first but progressively over time.

    Indeed the ECB is not playing ball so therefore we have really no choice but to eject under these circumstances.
    Unfortunetly various powerful players withen this state wish to hold on to wealth that they have accrued via deception and fiscal / monetory malice.
    They do not seem to realise that they are not special creatures – as the water begins to rise eventually all those without lifeboats will drown and even those with lifeboats will experience the possibilty of eviction from their floating islands.
    As for trade protectionism well we did not start this racket ( we have been punished for being the best / most stupid boy in the class) – when things get worse agricultural products will become more valuable then cars and we have enough of the former.
    If we do not do something soon we will begin to tear each other apart for exponentially declining crumbs.

  9. DoC: “It seems we are about to test stupididty & greed to destruction.”

    That’s a good description of Easter Island – financially speaking.

    “We will have to build internal wealth , modestly at first but progressively over time.”

    That is a paradigm shift. It is asking too much absent a very nasty and disagreeable suprise.

    @YoB: We are heading back to the ‘goode-olde-days’ of protectionism. China and Japan are real good at it. Just told the rest of us to “Father Jack Off!” And we have obliged. Let’s see if the US is the first of the big boys to break ranks on this one. We can always impose a 100% impost on anything that is not made or grown above 50 North and an appropriate East-West Longtitude range. Not efficient, but its survival of the State that matters, not the well-being of global, private financial interests.

    What is wealth anyways? ‘Pose its whom one asks? I guess if we had smaller mortgages, owed less and borrowed less we would be invertedly wealthier!

    Brian Snr.

  10. Nearly €90bn in private household deposits. That’s an average of €60,000 per household (of which we have 1.5m). Certainly there will be some/many without deposits but they must also be fairly widely spread because you’d assume the wealthy depositors had already transferred their funds elsewhere.

    Is it time for Minister Noonan to don a “We’re not Greece” t-shirt and give us a rendition of the Pet Shop Boys S-H-O-P-P-I-N-G ( you’d nearly miss politicians that could belt out a good old song).

  11. Hi Jagdip,

    We don’t get the numbers anymore but I would guess that at least one third of that €87.5 billion is in current accounts. It could be higher

    Although Noonan might be looking to get people shopping rather than saving the numbers show that household deposits are falling not rising. This is also confirmed by the Central Bank’s Household Sector Accounts. It is pretty clear that the 12% savings rate is more of a function of borrowing and repaying behaviour rather than saving and depositing behaviour.

  12. First the basics
    Goverment money creation :
    http://www.youtube.com/watch?v=GxKvLCyl7z0
    The Eurozone is the only juristiction where this activity is limited by the Central Bank !!

    Bank debt creation :
    http://www.youtube.com/watch?v=28fPAO0jJJ0
    This is a unlimited function in all known areas of the universe.

    We have given control of money creation to bankers , they now have control of both debt & money !!!!!!!!!
    What do you think bankers are going to do with this power ?
    The eurozone is imploding because there is too much debt relative to money.
    They will try to take everything.

  13. The €87.5 bn in private household deposits – does that figure include money on deposit in the various PO savings?

  14. @ Seamus Coffey

    ‘Loans to non-property, non-financial SMEs accounted for 63.9 per cent of total credit to non-property, non-financial private-sector enterprises at end-March 2011. Lending to these SMEs fell by 9.7 per cent in the year ending March (€3.3 billion)…’

    We are looking at the domestic economy here, and it ain’t pretty. Anaemic credit creation for SMEs in circumstances where central bank rates are at historic lows. Is it lack of demand/confidence, credit rationing, or both ?
    If/when state demand is pulled, we can look out.

    ‘Other prominent sectors in terms of credit outstanding were manufacturing and business and administrative services. Credit advanced to these sectors was 7.2 per cent lower and 4.3 per cent higher on an annual basis, respectively at end-march 2011’.

    No factory jobs so. As for Minister Noonan’s wishful thinking about shopping, less said the better. As you say, the imagined pot of ‘savings’ is earmarked for deleveraging.
    What are the ‘business and administrative service’ which are thriving, apart from IT consultancies and insolvency specialists ?

  15. The mortgage arrears data figures said there was 116bn in mortgages in Ireland, these figures suggest:

    – €98.9 billion AND
    – €35.1 billion (securitised)

    What gives?

  16. @ Rob

    These figures are only for credit institutions who are based in Ireland. Bank of Scotland (Ireland) left at the end of 2010 and €8 billion of mortgages left the Central Bank’s statistics but not the balance sheets of households. That, and other instances, could account for some of the difference between the €99 billion and €116 billion figures.

  17. Ah, I see,

    I think it is €98.9 billion + €35.1 billion = €134bn though.

    (rather than the 35.1bn being part of the 98.9bn)

    Regardless, I see what you mean – thanks.

  18. @ Paul Q,

    The data of credit to business are damning. A recent survey from ISME suggested over 50% of loan applications from their members were rejected. The most recent report from the Credit Review Office puts the level of Successful and Partial Successful loans applications at nearly 75%. Whatever about the differences between these figures, the actual amount of credit forwarded to loans is falling.

    It is not easy to disentangle the cause and effect relationships at play here. Are business struggling because they have reduced access to credit or is credit falling because businesses are struggling? Of course, the presence of a cathartic banking system is an added complication.

  19. @Seamus Coffey

    To me the answer is very clear – end consumer demand is continuing to shrink and its filtering through to SMEs who are struggling to repay debt and struggling to bridge the cashflow gap with o/d credit because the banks cannot afford to lend as the new capital requirements are too draconian for this stage in the economic cycle. It’s very simple.

    It goes back to an issue that has been mentioned many times before and the simple fact is that the capital requirements the Regulator has imposed on the banks, that are still standing, are complete lunacy.

    We require the Regulator to throw away the Basel III rulebook and declare RoI a Basel III free zone for the next 5 years – I’m deadly serious.

    Regulators and CBanks are fighting a war which is well and truly over, the horse is bolted and he ain’t coming back – why Regulators are insisting on these daft capital measures when the valuation genie has well and truly flown worries me. We require people in these positions to be acutely conscious of the very different type of economic cycle which we’ve experienced over the past 3 years – what do we get – we get bean counting rule specialists. Exactly the opposite to what’s required. Until this error is recognised at Govt level I’m afraid the economic spiral continues lower – all due to our own making.

    Does anyone actually believe the ECB/EU/IMF could not be sat down and explained this very basic principle, the Regulatory Generals are fighting a 2000-2007 Regulation war – the battles have been lost, the soldiers (Irish banks) are well and truly dead, why they feel the need to re live in a world of ‘what we should have done’ is beyond me. Most evidence suggest that core Tier 1 ratios above 7% are of little value (perticularly when the banks balance sheets have already taken the write down hits – exactly what is the ‘buffer’ capital really for?)Bizzare.

    To solve our issues, some clues:

    – Recognise that the mis pricing error in relation to property, particularly housing and residential generally is just that – a fundamental error in asset pricing, nothing more nothing less. Calculate the error and write down the loans to the long run valuation metrics that make sense i.e. long run average rental yields. Forget the nonsense about new bankruptcy laws, sure its necessary but the error here is not one sided (as the bankruptcy proceedings assumes old and new) the banks own and are the cause of the lion share of the mis pricing mess. Loan by loan write-downs are absolutely necessary – it’s not fair but it’s required. Its not complicated.

    – Basel III is set aside for 5 years

    – Public sector salaries are re benchmarked to European averages

    – For the love of God can somebody please recognise that Irish people react very positively to tax breaks – forget the sop that it’s a middle class benefit – it’s required. Raising tax rates reduces yields. Repeat in most instances raising tax rates reduces yield. Raising tax rates reduces yields. Please Govt parties stop doing it. It hasn’t worked in the past and will definitely not work in the future. (On a micro level please note the increasing incidence of diesel washing facilities being discovered – there’s a market for it because the cost of the legal product is too high – its not complicated, reduce the excise and the problem literally washes away and journeys that are being postponed based on fuel cost issues recommence and commerce has a better chance of prospering).

  20. @YoB

    Even in the 1920s the connections between public expenditure, credit, consumer demand, money supply etc. were recognised. It’s called proto-Keynesianism today.

    Nonetheless, 1929-32 witnessed a titanic battle between on the one hand those who felt (often wrongly) that their interests were served best by hard money and on the other those who were out of a job or whose businesses were being crushed. Roosevelt and reflation won the argument in the end, but in 1936 a conservative congress made the capital interests triumphant once more and the USA plunged back into depression.

    What are the chances of a project like the Tennessee Valley Authority being created anywhere in the world today? Nil. Rural Electrification? Nil. If public sanitation didn’t already exist, it would be expected that a cholera and typhoid afflicted population would magically construct one spontaneously.

    People have been brainwashed into believing that any government expenditure is wasteful and a drain on — to use the modish phrase — “the productive economy” (as if that economy would be productive without an educated workforce or reliable weights and measures or roads or commodities of guaranteed quality or a court system to enforce contracts or police to defend property, including pension fund assets and so on).

    All the arguments about devaluation, reflation etc. are not what they appear to be on the surface; as was the case in the 1930s, capital interests stand on one side and employment on the other. It isn’t a battle of information against ignorance, it’s a battle between information and misinformation.

  21. Big mistake above. The ‘conservative congress’ was in fact a Democrat supermajority. The arguments with the Roosevelt administration about the deficit, their outcome and the slide back into depression were as described, however.

  22. @Adrian
    No mistake at all. ‘Sound money’ was a universal cry, not a Republican one – from that point of view, it was indeed a ‘conservative’ (with a small ‘c’) Congress.

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