MORE THAN €9 billion in foreign deposits was withdrawn from Irish financial institutions in September, according to new monthly figures from the Central Bank.
The figures reflect the sharp funding pressure experienced by Irish banks through the month of September which led to the State guaranteeing deposits and debts of €440 billion at six Irish-owned lenders at the end of the month.
The data shows that Irish banks relied more heavily on loans from the European Central Bank (ECB) to tide them over as funding markets froze following the collapse of US investment bank Lehman Brothers on September 15th and as large deposits were withdrawn from the Irish banking system.
The amount of ECB money borrowed by the Irish retail clearing banks - AIB, Bank of Ireland, National Irish Bank and Ulster Bank - jumped to €8.8 billion at the end of September from €1.5 billion a month earlier, an almost six-fold increase in just four weeks.
Irish mortgage lenders, including the retail clearing banks, had ECB borrowings of €32.2 billion owing at the end of last month - almost double the total amount outstanding a month earlier.
Excluding the retail clearing banks, combined ECB borrowing by mortgage lenders - ACC Bank, Bank of Scotland (Ireland), EBS, First Active, Bank of Ireland's ICS Building Society, IIB Bank (now KBC Bank Ireland), Irish Life Permanent and Irish Nationwide - jumped to €23.4 billion at the end of September, up 59 per cent from €14.7 billion a month earlier.
Total ECB borrowing by Irish financial institutions, including international institutions based in the IFSC, surged 35 per cent, or €15.3 billion, to an all-time high of €58.6 billion at September 26th.
This is more than double the amount owing a year earlier.
One bank analyst said that following the closure of wholesale money markets in the aftermath of the collapse of Lehman, the "only avenue to replace deposit withdrawals and maturing wholesale funding was the ECB".
European Commission president José Manuel Barroso has warned that "looking backwards" to protectionism offered no hope of resolving the global financial crisis, saying the erection of trade barriers would be "counter-productive", writes Frank McDonald in Milan.
Mr Barroso said governments should instead be offering "smart supports" to boost their economies - for example, by investing in cleaner cars.
Speaking at the opening of Bocconi University's new faculty building, which was designed by Dublin-based Grafton Architects, he said "unprecedented co-ordination is needed in response to the unprecedented challenge".
The commission's first priority had been to play its part in the rescue of financial institutions in difficulties. "We must now look at what other measures are needed to fill regulatory holes, such as credit rating agencies, hedge funds and private equity funds."
