Information Release 4 January 2012
The Central Bank today published Quarterly Financial Accounts (QFA) for Ireland. The accounts present a complete and consistent set of quarterly data for all resident institutional sectors in Ireland.[1] They provide comprehensive information not only on the economic activities of households, non-financial corporates, financial corporates and Government, but also on the interactions between these sectors and the rest of the world. The data tables show the financial balance sheet and financial transactions of each of these sectors from Q1 2002 to Q2 2011. An overview of some notable trends in households, Government and non-financial corporates is outlined below.
Household sector results show:
- Irish households' net financial wealth, which does not include housing assets, stood at €106.9 billion or €23,852 per capita at end Q2 2011. This represented a slight decline in net financial wealth of €192 million or 0.17 per cent over the quarter and marked the first fall in household’s net financial wealth since Q1 2009.
- The reduction in net financial wealth during Q2 2011 reflected a decline in household’s financial assets over the quarter, which was mitigated to some extent by a corresponding decline in liabilities. The fall in household financial assets was mainly as a result of a fall in the value of insurance technical reserves, due to weaker performance in the international bond and equity markets.
- Overall, households' net financial wealth has increased by 85 per cent or €49.2 billion between Q1 2009 and Q2 2011. The increases in net financial wealth have been influenced by two factors: appreciating financial asset values, as insurance technical reserves[2] and quoted shares have recovered some of the value lost during the financial turmoil; and declining liabilities, as households borrowed less and repaid their existing loans.
- Households' liabilities continued to decline over the quarter, albeit at a slower rate than in previous quarters. Households' liabilities stood at €192.4 billion or €42,896 per capita in Q2 2011. This represented a decline of 0.4 per cent over the quarter. Overall, liabilities have declined by €19.89 billion or 9.4 per cent since their peak of €212.2 billion in Q4 2008.
- Households continued to be net lenders during Q2 2011, albeit at a lower level than in previous quarters. This means that on average Irish households have been lenders, providing funding to the rest of the economy. Net lending is influenced by two factors: household’s financial asset transactions and their liabilities transactions. Since late 2009, households have been deleveraging, thereby reducing high debt levels. This trend is primarily responsible for households' net lending position.
- Household net lending reached its peak during Q2 2010, but has declined every quarter since, as households have reduced investment in financial assets, particularly deposits. The results show that since end 2010, households have been on aggregate disinvesting in ‘currency and deposits’.
Government sector results show:
- Government liabilities fell to €152.8 billion during Q2 2011, representing a decline of 2 per cent from the previous quarter. The decline largely reflects a reduction in debt securities, as outstanding securities issued by the Government were redeemed, as the value of securities continued to fall due to the sovereign crisis. Loans to the Government continued to increase during Q2, as the State received further funding from the EU/IMF programme. Since the start of Q1 2011, the State has received nearly €23 billion in funding from the EU/IMF. By Q2 2011, EU/IMF funding formed 15 per cent of total Government liabilities.
- The Government’s net financial wealth, the difference between Government’s financial assets and liabilities, increased slightly by €296 million and €480 million during Q1 2011 and Q2 2011, respectively. These increases marked the first rise in net financial wealth since Q4 2007.
- The Government deficit, when measured as a four-quarter moving average, fell from €7.8 billion during Q1 2011 to €6.9 billion in Q2 2011. During Q1 2011 and Q2 2011, there were no capital injections into the banking sector by Government. In July 2011, the Government injected €17.6 billion into AIB/EBS, BoI and ILP. The impact of these injections on the debt will be captured in the Q3 2011 Government accounts.
Non-Financial Corporate sector results show:
- In Q2 2011, the non-financial corporate (NFC) sector’s liabilities increased by almost €11 billion to €826 billion. The stock of financial assets increased by over €4.5 billion to €643 billion. As financial liabilities exceeded financial assets, this reduced the sector’s net financial wealth[3] by 3.6 per cent to minus €184 billion.
- In terms of the valuation changes of financial assets and liabilities, both experienced a decline in value during Q2. Financial assets experienced a greater decline in value compared to liabilities. The NFC sector’s financial assets declined in value by approximately €8.8 billion in Q2 2011 largely reflected a decline in the value of the NFC sector’s ‘unquoted shares and other equity’ assets.
- The NFC sector was a net lender, when measured as a four-quarter moving average, for the third consecutive quarter during Q2 2011. This means that on average the NFC sector was a net lender providing financing to the other sectors in the economy.
- The NFC sector received almost 55 per cent of total funding, from ‘shares and other equity’ and 30% of funding from ‘loans’, both showing similar proportions of total funding as in Q1 2011.
View further information
[1] The Central Bank now regularly publishes these statistics at t+120 days from end-quarter.
[2] ‘Insurance technical reserves’ include life assurance policies and pension funds.
[3] Net financial wealth is defined as the difference between financial assets and liabilities. It should be noted that net financial wealth does not include non-financial assets.