20220706-IMF-Ireland_Financial_System_Stability_Assessment_66页_1mb

Ireland Financial Sector Assessment Program (FSAP) 2022

Overview

Date: June 15, 2022
Assessed by: International Monetary Fund (IMF)
Key Findings:

• Ireland's economy has strengthen significantly since the 2016 FSAP, aided by regulatory improvements and effective handling of Brexit and pandemic challenges.
• Banking system remains highly capitalized and liquid despite legacy issues from the Global Financial Crisis (GFC).
• Financial system has grown rapidly, particularly the Market-Based Finance (MBF) sector, which is now the largest component of the financial system.
• Risks to financial stability stem from a larger and more complex financial system, non-bank lending, Fintech, and climate change.

Key Recommendations (Five Themes)

1. Strengthen Supervisory Powers

   • Enhance de jure independence of the Central Bank.
   • Expand accountability mechanisms and enforcement powers against individuals.
   • Implement a sequenced action plan to address climate-related financial risks.

2. Expand Macroprudential Oversight

   • Address risks from non-bank financial institutions (NBFs).
   • Introduce leverage limits and liquidity management guidelines for property funds.
   • Develop tools to mitigate systemic risks in the MBF sector.

3. Address Legacy GFC Issues

   • Remove impediments to mortgage repossession and collateral recovery.
   • Complete government divestiture in retail banks.
   • Streamline procedures for resolving non-performing loans (NPLs).

4. Enhance Resolution Frameworks

   • Strengthen interagency coordination for bank resolution and crisis management.
   • Develop granular data and tools for effective creditors’ rights enforcement.

5. Combat Financial Integrity Risks

   • Improve Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) framework, including better data collection and advanced analytics.

Key Concerns

• Banking System: Despite strong buffers, post-GFC policies limiting credit and collateral recovery contribute to high costs and low profitability in retail banking.
• Non-Bank Lending and Fintech: Rapid growth in non-bank credit and Fintech poses risks due to lack of comprehensive regulation.
• Climate Change: Ireland's financial sector exposure to climate risks, particularly physical and transition risks, requires urgent monitoring and mitigation.
• MBF Sector: Complexity and opacity in the MBF sector, especially the "OFI residual," hinder effective oversight.

Authorities’ Response

The Irish authorities broadly agreed with IMF recommendations, emphasizing ongoing collaboration with European and international regulators to close data gaps and enhance financial stability.