Irish Nationwide and Anglo Irish behind borrowing spike

City A.M. Reporter
ANGLO Irish Bank and Irish Nationwide Building Society were behind the spike in emergency borrowing from the European Central Bank, as they seek a speedy sale of their deposit books.

The two troubled lenders, at the heart of Ireland’s financial crisis, are selling deposits and corresponding assets as part of a wind-down of their operations under an EU/IMF bailout deal.

To ensure a sale within the next week, they have had to withdraw the underlying assets, around €15bn (£12.7bn) in state-backed IOUs, as collateral from the normal week-long ECB borrowing facility and swap them instead for emergency overnight loans, a source said.

The source said the spike in ECB overnight funding, which caused a stir across European markets last week, could continue even after a sale because the buyer of the deposits, expected to be a bank in Ireland, would have to wait until the next ECB weekly refinancing operation to switch out of the more expensive overnight facility.

“It’s possible this spike in overnight borrowings could last for a couple of weeks,” said the source.

ECB overnight borrowings hit more than €16bn on Friday, the highest amount since June 2009.