Central Bank of Ireland Reports Results of Financial Stability Review
The Central Bank of Ireland published its report on the results of the second financial stability review of 2019. The report outlines key risks facing the financial system and the central bank assessment of the resilience of the economy and financial system to adverse shocks. Additionally, the Central Bank of Ireland published four Financial Stability Notes assessing the mortgage market and the functioning of the macro-prudential mortgage measures. These measures set limits on the size of mortgages that consumers can borrow through the use of loan-to-value and loan-to-income limits. Also published was a Financial Stability Note on mapping the market-based finance in Ireland.
The financial stability review indicates that as a small and open economy, Ireland remains vulnerable to shocks arising abroad. The possibility of a disorderly Brexit, changes to global tax policy, and a sudden change to global financial conditions are all ongoing risks to financial stability in Ireland. While the further fall in global interest rates mitigates near-term debt sustainability concerns, this can build vulnerabilities in the medium term. Domestically, an economy close to capacity and continued lending growth points to a gradual build-up of cyclical systemic risk. Overall, the banking system is now better able to absorb shocks, but profitability challenges have become more acute. The review also highlights that the countercyclical capital buffer rate has been retained at 1%. The Governor also announced an annual review of the other systemically important institutions framework, under which the six systemically important institutions have buffer rates of between 0.5% and 1.5%.
The Central Bank of Ireland released the following Financial Stability Notes:
- The financial stability note related to default by buyers highlights that there continues to be a lower likelihood of default for first time buyers compared with second and subsequent buyers.
- The note on mortgage servicing burdens and loan-to-income caps explores the relationship between monthly mortgage repayments and disposable income of borrowers in the context of the mortgage measures. The paper finds that the average household drawing down a mortgage in 2019 is spending almost one quarter of its net monthly income on mortgage repayments.
- Another financial stability note provides a measure of bindingness in the Irish mortgage market by combining estimates of credit available and take-up for individual Irish borrowers.
- The note titled "Mortgage borrowers at the loan to income limit” highlights that lenders respond to macro-prudential mortgage measures in the country by reducing lending and leverage to households seeking high loan-to-income ratios.
- The note on mapping market-based finance in Ireland explores growth in the market-based finance sector over the last decade, the composition of the sector domiciled in Ireland, and the benefits and vulnerabilities associated with this form of financial intermediation.
Related Links
- Press Release on Financial Stability Review
- Financial Stability Review (PDF)
- Press Release on Notes on Mortgage Market
- Press Release on Note on Mapping Market-Based Finance
Keywords: Europe, Ireland, Banking, Securities, Insurance, Brexit, Macro-Prudential Policy, CCyB, Systemic Risk, Financial Stability Review, Market-Based Finance, Central Bank of Ireland
Featured Experts
Blake Coules
Across 35 years in banking, Blake has gained deep insights into the inner working of this sector. Over the last two decades, Blake has been an Operating Committee member, leading teams and executing strategies in Credit and Enterprise Risk as well as Line of Business. His focus over this time has been primarily Commercial/Corporate with particular emphasis on CRE. Blake has spent most of his career with large and mid-size banks. Blake joined Moody’s Analytics in 2021 after leading the transformation of the credit approval and reporting process at a $25 billion bank.
Previous Article
FCA Announces List of Firms for Fifth Cohort of Regulatory SandboxRelated Articles
ISSB Sustainability Standards Expected to Become Global Baseline
The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.
IOSCO, BIS, and FSB to Intensify Focus on Decentralized Finance
Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.
BCBS Assesses NSFR and Large Exposures Rules in US
The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.
Global Agencies Focus on ESG Data, Climate Litigation and Nature Risks
At the global level, supervisory efforts are increasingly focused on addressing climate risks via better quality data and innovative use of technologies such as generative artificial intelligence (AI) and blockchain.
ISSB Standards Shine Spotlight on Comparability of ESG Disclosures
The finalization of the IFRS sustainability disclosure standards in late June 2023 has brought to the forefront the themes of the harmonization of sustainability disclosures
EBA Issues Several Regulatory and Reporting Updates for Banks
The European Banking Authority (EBA) recently issued several regulatory publications impacting the banking sector.
BCBS Proposes to Revise Core Principles for Banking Supervision
The Basel Committee on Banking Supervision (BCBS) launched a consultation on revisions to the core principles for effective banking supervision, with the comment period ending on October 06, 2023.
US Proposes Final Basel Rules, Transition Period to Start in July 2025
The U.S. banking agencies (FDIC, FED, and OCC) recently proposed rules implementing the final Basel III reforms, also known as the Basel III Endgame.
FSB Report Outlines Next Steps for Climate Risk Roadmap
The Financial Stability Board (FSB) recently published the second annual progress report on the July 2021 roadmap to address climate-related financial risks.
EBA Plans on Ad-hoc ESG Data Collection and Climate Scenario Exercise
The recognition of climate change as a systemic risk to the global economy has further intensified regulatory and supervisory focus on monitoring of the environmental, social, and governance (ESG) risks.
