There's still money in the Irish economy, it's just being used to pay off personal debt, based on Bank of Ireland's results last week. The amount of consumer loans fell by 33% to €4bn in the last nine months of 2009.

"This decrease is primarily as a result of repayments as customers seek to reduce their levels of indebtedness and a slowdown in demand for loans and other credit facilities," the bank said.

Impairment charges in the portfolio, however, remain "significant due to higher unemployment, high levels of personal indebtedness and lower disposable income".

The changed economic circumstances also had an impact in terms of the impairment charge on residential mortgages which almost doubled to €237m for the last nine months of 2009, €165m of it in Ireland, compared to €127m for the 12-month period ended 31 March 2009.

"This increase is due to the impact on the level of arrears from rising unemployment and lower disposable income, together with further declining property prices," the bank said.

The €165m figure in Ireland was an increase from €24m in the same period in 2008; at the end of last year three-month arrears in the residential mortgage portfolio were 3.46%. In truth that figure is higher because, as revealed in the 'Sunday Tribune', customers moving to interest-only mortgages are not classified as impaired by the Irish lenders.

A worrying sign in the longer term is that the percentage of residential mortgages that are past due but not impaired has increased by 21%, from €2.8bn at 31 March 2009 to €3.4bn at the end of last year.

Residential mortgage debt and the level of impairments will be the major factor looked at by ratings agencies and the banks will have to hope that interest rates will be increased on their own initiative so that they can claw back margin, as opposed to being mandated by the European Central Bank. Too many interest rate increases too quickly and impairments could soar.