New Central Bank Data: Irish organisations losing millions to the banking system
According to recently published data from the Central Bank of Ireland for January 2023 Irish banks are not passing on the benefit of interest rate increases to their customers. Whereas the average cost of new borrowings to companies and organisations (NFC’s – Non-Financial Corporations) rose to 4.27% in January up from 2.56% in 2022 rates for overnight funds remained at 0.04% and new deposits with agreed maturity at 1.92% in January. The gaps between interest on borrowings and interest on deposits and credit bank balances should be a concern.
With risk concerns continuing, bank rescues in US and Europe, and ongoing concerns about bank stability there is a huge focus on the Irish banks. Companies and organisations will not continue to accept paltry returns on bank funds. The dynamic is shifting and the question they should be asking themselves at what price they are prepared to lend to their banks. Business customers should reduce the concentration of their risk by spreading their funds across multiple banks, reviewing the maturity profile of their deposits and closely monitoring bank ratings and market information. All organisations must ensure that there is strong financial governance in place including a robust treasury policy and regular reviews of their cash positions.
Bankhawk helps companies and organisations to optimise their banking arrangements and safeguard their cash balances.
Central Bank of Ireland: (Statistical Release published 9th March 2023)
Non-Financial Corporations (NFC) Lending Rate
- NFC overdrafts stood at €6,750 million at end-January, an increase of 49.5 per cent from January 2022. The associated weighted average interest rate was 4.51 per cent.
- New NFC loan agreements reached €1,471 million in January, 5 per cent lower than January 2022. The weighted average interest rate was 4.27 per cent in January, up from the previous year (2.56 per cent). The equivalent rate in the euro area stood at 3.60 per cent in January.
- New NFC loans of up to €250k amounted to €109 million in January, with the associated weighted average interest rate at 5.81 per cent. There were €67 million new NFC loans of over €250k and up to €1 million newly agreed in January, with a weighted average interest rate of 4.59 per cent.
- The volume of new NFC loans of over €1 million, which account for 88% of all new NFC loans, equalled €1,295 million in January, a decrease of 4.4 per cent compared to January 2022. The weighted average interest rate on this instrument category was 4.12 per cent in January (Chart below)
Household and Non-Financial Corporations Deposit Rates
- Interest rates on household overnight deposits stood at 0.03 per cent in January 2023 (Chart 4). Interest rates on new household deposits with agreed maturity rose to 0.71 per cent in January in Ireland. The equivalent rate in the euro area was 1.64 per cent.
- Interest rates on NFC overnight deposits stood at 0.04 per cent in January 2023. Interest rates on new NFC deposits with agreed maturity was 1.92 per cent in January. The corresponding rate in the euro area was 2.01 per cent.
Source: https://www.centralbank.ie/docs/default-source/statistics/data-and-analysis/credit-and-banking-statistics/retail-interest-rates/2023m01_ie_retail_interest_rate_statistics.pdf?sfvrsn=7321991d_3
