WEDNESDAY, 25/10/2017 - Scope Ratings AG

The largest Irish banks’ funding profiles have become far more conservative post-crisis, says Scope

Scope Ratings highlights that Bank of Ireland and Allied Irish Banks’ approach to funding has changed profoundly after the financial crisis, with unsecured wholesale funding levels running much lower than was the case even at the turn of the millennium.

This is Scope’s first report on Irish banks. At this time, the agency has no public ratings on either of these two banks.

Scope notes that both Bank of Ireland and Allied Irish Banks now make minimal use of short-term market funding, and are still more dependent on various forms of secured wholesale funding than was the case before the crisis, notably by drawing on the ECB’s TLTRO II facility and, in Bank of Ireland’s case, the Bank of England’s Long Term Funding Scheme.

Scope also examines the two banks’ intentions to issue MREL-eligible debt out of newly established holding companies going forward, including the regulatory rationale behind this. According to Jennifer Ray, Scope bank analyst and the author of the report, “Given the predominantly deposit-funded nature of BOI and AIB’s simplified business models, the pattern of unsecured issuance going forward is, somewhat ironically, likely to be driven more by regulatory requirements than the need to refinance existing debt.”

The report, titled “Spotlight on Irish Banks’ Funding: Preparing for MREL” can be downloaded HERE.