EU-IMF Relax Loan-To-Deposit Ratio Deadline For Irish Banks

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The EU authorities and the International Monetary Fund (IMF) have relaxed a tight deadline set in the bailout deal for the Government to establish “ambitious” new loan-to-deposit ratio targets for Ireland’s struggling banks, the Irish Times reported. The high loan-to-deposit ratios of Ireland’s banks, a legacy of imprudent property lending and declining deposits, are a key measure of their weakness. The new targets were to have been set by the end of last year, according to the Memorandum of Understanding (MoU) the Government agreed with the European Commission, the European Central Bank and the IMF. The troika is understood to have requested an open-ended extension to the deadline. But well-placed sources claimed there was no slippage in the bank reform process generally. The establishment of new loan-to-deposit ratio targets is one of a series of actions to deleverage Ireland’s banks. This is a complex task, particularly so given the likelihood of structural reform in the sector. With this in mind, one source suggested that the initial deadline may have been overly ambitious. The Central Bank fulfilled another obligation set by the MoU when it yesterday appointed external advisers to help bring about a major downsizing of the domestic banking sector. The Central Bank confirmed yesterday that Barclays Capital, the Boston Consulting Group and Blackrock Solutions would help the Central Bank with various aspects of its efforts to assess, reshape and ultimately reduce the size of the domestic banks. Read more.