Ireland Central Bank Statement

Author: | Published: 5 Sep 2017
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The Irish economy continues to grow at a robust pace, underpinned by domestic demand. Substantial employment growth continues to support economic performance, which picked up significantly during 2016. While the overall growth outlook remains relatively positive, Brexit has been identified as a significant risk to the Irish economy, with Central Bank estimates suggesting that Irish GDP could be around 3% lower after 10 years in the event of no post-Brexit trade agreement. This figure is expected to translate into roughly 40,000 fewer jobs, which may be disproportionately concentrated in specific regions and sectors.

Overall, positive labour market conditions continue to support a reduction in household sector debt and mortgage arrears. Nonetheless, the sector remains relatively highly indebted and almost half of mortgage arrears cases are very long term in duration. The Central Bank continues to address the problem of mortgage arrears through supervisory engagement with banks.

Irish retail banks remain profitable in aggregate. The overall balance sheet of the sector continues to decline as new lending is more than offset by loan redemptions and asset disposals. Aggregate fully-loaded capital ratios increased in 2016 as risk-weighted assets continued to decline.

As the designated national authority for macroprudential policy in Ireland, the Central Bank has implemented a number of macroprudential measures in recent years with the aim to increase banking sector resilience. These include capital buffers for domestically important institutions (O-SIIs) and a countercyclical capital buffer (CCyB). The CCyB is currently set at 0% while seven institutions identified as systemically important will begin to phase-in O-SII buffers from 2019.

In early 2015, proportionate caps on loan-to-value and loan-to-income ratios for certain new residential mortgages were introduced, aiming to increase the resilience of the banking and household sectors to the property market and protect against bank credit and housing price spirals. The first annual review of these rules was released in November 2016 and based on this, slight adjustments were applied to the measures. The second annual review is currently underway.




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