Growth in lending to eurozone firms ‘rebounds’ in July – data

ECB hands Irish lender first fine as bank supervisor

FRANKFURT AM MAIN, Aug 28, (AFP): Growth in lending to companies in the eurozone rebounded in July following a slump in June, data from the European Central Bank showed Monday.

Loans to non-financial corporations grew 2.4 percent last month, adjusting for some purely financial transactions, the ECB recorded in a monthly statement.

June had seen the pace of growth slump to 2.0 percent from the 2.5 percent achieved in May.

Meanwhile, expansion in lending to households maintained its 2.6-percent rate in July, the same level as the previous two months.

Still in adjusted terms, overall growth in lending to the private sector picked up slightly, climbing from 2.5 percent in June to 2.6 percent in July.

Lending to households and nonfinancial firms is an important indicator of the effectiveness of the ECB’s unconventional monetary policy — designed to boost growth and inflation with easy credit.

With cheap loans to banks, record low interest rates and monthly bond purchases of 60 billion euros ($71.5 billion), policymakers have sought to pump cash through the financial system and into the real economy.

They hope that readier access to credit will prompt firms and households to spend, invest and hire, pushing up economic growth and helping inflation towards the ECB’s target of just below 2.0 percent.

But while growth in the 19-nation eurozone has picked up since the introduction of the policies, inflation remains stubbornly low, leaving policymakers debating over the right time to wind down their interventions.

ECB President Mario Draghi offered no hints about a possible end to bond-buying or low interest rates in a Friday speech at a central bankers’ conference in Jackson Hole, Wyoming.

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The European Central Bank said Monday it had fined Irish lender Permanent TSB over breaches of liquidity requirements, the first such decision since the institution took over supervisory responsibilities in 2014.

Retail bank Permanent TSB (PTSB) failed to meet targets for the amount of cash it should have had on hand during two periods in 2015 and 2016, prompting the ECB to impose fines totalling 2.5 million euros ($3.0 million) on July 13 this year.

PTSB’s infraction related to the short-term liquidity ratio, a yardstick regulators use to judge a bank’s ability to weather an acute crisis.

Nevertheless, “this breach did not change the liquidity position of Permanent TSB ... and the bank has fully remediated the issue,” the ECB said in a statement.

The Single Supervisory Mechanism (SSM) branch of the ECB has since 2014 been the top banking regulator in the 19-nation euro single currency area.

It is the first time the supervisor has used its powers to impose a fine.

PTSB said in a statement it had “self-identified” the breaches to supervisors after they “arose through a misinterpretation of a revised regulation.”

A spokesman added that it does not plan to contest the fine in at the European Court of Justice.

Since the breaches, the group’s liquidity buffer had grown from 4.0 billion euros to 6.5 billion, PTSB said.

The bank went through a restructuring and received cash from the Irish government in the wake of the 2008 financial crisis.