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Europe > Ireland

You are looking at 1 - 10 of 204 items for :

  • Type: Journal Issue x
  • Banks; Depository Institutions; Micro Finance Institutions; Mortgages x
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Cover Selected Issues Papers
Vulnerabilities and Risks in Denmark’s Nonbank Financial Institutions: Denmark
Burcu Hacibedel
and
Mariusz Jarmuzek
Denmark’s nonbank financial institutions (NBFI) sector has substantially increased in size since the Global Financial Crisis (GFC), becoming an important part of the financial system. Systemic risk associated with NBFIs have been contained but warrants close monitoring, especially regarding leverage, liquidity buffers, and interconnectedness. There are important mitigating factors that reduce systemic risk stemming from NBFIs in Denmark. Strengthening of systemic risk assessment and policy framework for NBFIs is warranted and could include developing a systemic risk assessment framework covering both banks and NBFIs and an ensuing system-wide stress testing framework.
Keywords:
Denmark; balance sheet analysis; non-bank financial institutions; systemic risk assessment; NBFI sector; Denmark's nonbank financial institutions; D. mitigating factor; covered bond bond market; asset liability management risk; Nonbank financial institutions; Covered bonds; Mutual funds; Systemic risk; Global
Cover Technical Notes and Manuals
The Case for (and Against) Asset Management Companies in Banking Crises
Miguel A Otero Fernandez
,
Jaime Ponce
,
Marc C Dobler
, and
Tomoaki Hayashi
This technical note explores the advantages and disadvantages of establishing state-sponsored centralized asset management companies (AMCs) to address high levels of bank asset distress during financial crises. AMCs may offer potential benefits like mitigating downward price spirals or achieving efficiency gains by consolidating creditor claims and scarce expertise. However, significant risks and costs warrant careful consideration. These include extreme uncertainties in asset valuation and substantial operational and financial risks. Past international experiences highlight the dangers of underestimating these risks, potentially turning the AMC into a mechanism for deferring losses to taxpayers, rather than minimizing them, and ultimately increasing long-term public costs and moral hazard. This technical note emphasizes these trade-offs and discusses crucial design elements for effective AMCs: a clear mandate, transfer pricing that prudently reflects asset values and disposal costs, strong governance with independent management, and efficient operational processes promoting transparency and accountability.
Keywords:
Asset Management Company (AMC); Bank resolution; Financial Crisis; Financial regulation and supervision; Problem Asset Resolution; Non-performing Loans; Bank restructuring.; asset price spiral; centralized asset management companies; give borrower; AMC need; AMC debt; bank asset distress; resolution strategy; recovery value; asset characteristic; Asset management companies; Distressed assets; Nonperforming loans; Asset valuation; Loans; Global
Cover IMF Working Papers
Micro-Assessment of Macroprudential Borrower-Based Measures in Lithuania
Mantas Dirma
and
Jaunius Karmelavičius
Despite having introduced borrower-based measures (BBM), Lithuania's housing and mortgage markets were booming during the low-interest-rate period, casting doubt on the macroprudential toolkit's ability to contain excessive mortgage growth. This paper assesses the adequacy of BBMs’ parametrization in Lithuania. We do so by building a novel lifetime expected credit loss framework that is founded on actual loan-level default and household income data. We show that the BBM package effectively contains mortgage credit risk and that housing loans are more resilient to stress than in the preregulatory era. Our BBM limit calibration exercise reveals that (1) in the low-rate environment, income-based measures could have been tighter; and (2) borrowers taking out secondary mortgages rightly are and should be required to pledge a higher down payment.
Keywords:
macroprudential policy; borrower-based measures; LTV; mortgage credit risk; lifetime expected loss; probability of default.; calibration exercise; BBM package; modeling mortgage risk; Lithuania's housing market; Mortgages; Loans; Credit risk; Housing prices; Macroprudential policy instruments; Europe; Baltics; Global
Cover IMF Working Papers
The Economics of Sovereign Debt, Bailouts, and the Eurozone Crisis
Pierre-Olivier Gourinchas
,
Philippe Martin
, and
Todd Messer
Despite a formal ‘no-bailout clause,’ we estimate significant net present value transfers from the European Union to Cyprus, Greece, Ireland, Portugal, and Spain, ranging from roughly 0.5% (Ireland) to a whopping 43% (Greece) of 2010 output during the Eurozone crisis. We propose a model to analyze and understand bailouts in a monetary union, and the large observed differences across countries. We characterize bailout size and likelihood as a function of the economic fundamentals (economic activity, debt-to-gdp ratio, default costs). Our model embeds a ‘Southern view’ of the crisis (transfers did not help) and a ‘Northern view’ (transfers weaken fiscal discipline). While a stronger no-bailout commitment reduces risk-shifting, it may not be optimal from the perspective of the creditor country, even ex-ante, if it increases the risk of immediate insolvency for high debt countries. Hence, the model provides a potential justification for the often decried policy of ‘kicking the can down the road.’ Mapping the model to the estimated transfers, we find that the main purpose of the outsized Greek bailout was to prevent an exit from the eurozone and possible contagion. Bailouts to avoid sovereign default were comparatively modest.
Keywords:
Euro area; Monetary Union; Sovereign debt; bailouts; Eurozone crisis; bailout size; no-bailout clause; debt country; debtor country; Monetary unions; Loans; Collateral; Debt default; Global
Cover IMF Working Papers
The Right Tool for the Job? Mortgage Distress and Personal Insolvency during the European Debt Crisis
Mr. Wolfgang Bergthaler
,
Jose M Garrido
, and
Anjum Rosha
The European debt crisis in the early to mid 2010s brought to the fore the issue of household debt distress: in the countries affected, widespread over-indebdtedness resulted in serious financial and social challenges. The crisis was primarily a mortgage debt crisis, but in several cases, the legal response was based on the introduction of personal insolvency procedures. This paper examines the challenges in designing and implementing legal reforms in this area to promote a better understanding of the main considerations in resolving personal insolvency and distressed mortgage debt in the context of crises. Lessons from the European crisis may prove valuable when dealing with the aftermath of the COVID-19 pandemic and the war in Ukraine on household debt distress.
Keywords:
consumer insolvency; household debt; mortgage debt; consumer debt; household debt distress; mortgage debt crisis; B. mortgage debt distress; mortgage distress; Solvency; Mortgages; Corporate insolvency; Debt sustainability; Debt settlement; Europe
Cover IMF Working Papers
Differential Effects of Macroprudential Policy
Nina Biljanovska
and
Sophia Chen
We explore the differential effects of lender-based macroprudential policies on new mortgage borrowing for households of different income using a comprehensive dataset that links macroprudential policy actions with household survey data for European Union countries. The main results suggest that higher-income households on average experience a larger reduction in mortgage loan size than lower-income households when regulation targeting total lenders’ assets tightens. In contrast, lower-income households on average experience a larger reduction in mortgage loan size than higher-income households when regulation targeting lenders’ capital requirements tightens. We also provide evidence of the different channels through which the differential effects operate.
Keywords:
Household borrowing; macroprudential policy; income distribution; differential effect; higher-income household; capital requirements; household income; capital requirement; Income; Mortgages; Loans; Macroprudential policy instruments; Global
Cover IMF Staff Country Reports
Ireland: Financial Sector Assessment Program-Technical Note on Macroprudential Policy Framework and Tools
International Monetary Fund. Monetary and Capital Markets Department
Ireland is a small open economy that is part of a monetary union and has a major financial system. Within the Euro Area (EA), Ireland comprises a relatively small proportion of aggregate GDP (3.4 percent), of which a significant portion is attributable to foreign-owned multinational enterprises (MNEs). Yet, the Irish financial system holds assets of EUR 7.9 trillion, over 18 times GDP. Since monetary policy is carried out by the European Central Bank (ECB) for the entire EA, macroprudential policy has the potential to play a critical stabilizing role for the Irish financial system.
Keywords:
bank funding; bank lending; CRE market vulnerability; lending to SME; bank sector; commercial real estate; Housing prices; Mortgages; Financial sector stability; Macroprudential policy instruments; Credit; Global
Cover IMF Staff Country Reports
Ireland: Financial Sector Assessment Program-Technical Note on Financial Interconnectedness of the Market-Based Finance Sector
International Monetary Fund. Monetary and Capital Markets Department
This technical note investigates the interconnectedness between the market-based finance (MBF) sector in Ireland and the rest of the financial system, with a view to assessing potential financial stability risks. Ireland has made good progress in implementing the recommendations from the 2016 Financial Sector Assessment Program, but some important data gaps remain to be closed. While many linkages between the domestic economy and the MBF sector have been analyzed, challenging data gaps and opaque linkages relating to the other financial institutions (OFI) residual should continue to be explored through ongoing cooperation at a domestic and international level. The Central Bank of Ireland’s fund stress-testing model remains under development and there remain some gaps in terms of granular data collection and analysis of the interconnectedness and composition of the significant activity of the remaining OFI residual. The analysis suggests that, notwithstanding progress, work remains to be done to elucidate fully the linkages between parts of the MBF sector and the rest of the financial system, and to the domestic economy, to explore further areas of potential systemic risk.
Keywords:
asset claim; property fund; balance sheet exposure; fund assets; SPE loan; D. fund exposure; other financial institutions; Financial statements; Special purpose vehicle; Loans; Commercial banks; Mutual funds; Global
Cover IMF Staff Country Reports
Ireland: Financial Sector Assessment Program-Technical Note on Insolvency and Creditor Rights
International Monetary Fund. Monetary and Capital Markets Department
This note analyzes select aspects of the system for insolvency and creditors’ rights in the context of an overall assessment of the Irish financial sector. It focuses on two areas: (1) the use and effectiveness of the corporate restructuring regime and (2) the resolution of mortgage related nonperforming loan NPLs. Ireland’s corporate insolvency regime is largely in line with international best practice, although the regime is little used, and a review is in order. The issue of long-term mortgage arrears is complex and will require further development of an overall strategy, with multiple government bodies playing a role. While mortgage arrears are largely a legacy issue from the 2008 crisis, the failure to fully resolve these arrears has the potential to undermine credit growth and affordability, given the impact on credit risk of higher uncertainty of realizing collateral. The Government should adopt a coordinated, multi-agency strategy for resolving mortgage arrears, informed by the granular data available on the financial situation and debt servicing capacity of borrowers. Published guidance on expected solutions based on financial indicators, and broader social support would be critical to this approach and possible strategy.
Keywords:
PDH mortgage account; mortgage ARREARS resolution process; mortgage lending; period accounts; companies registration office; Solvency; Mortgages; Corporate insolvency; Arrears; Data collection; Global
Cover IMF Working Papers
Contagion as a Dealmaker? The Effect of Financial Spillovers on Regional Lending Programs
Alexandra Fotiou
,
Alica Ida Bonk
, and
Georgios Manalis
The recent European sovereign debt crisis highlighted the critical role of regional lending arrangements. For the first time, European mechanisms were called to design financing programmes for member countries in trouble. This paper analyses how the risk of contagion, an essential characteristic of interlinked economies, shapes borrowing conditions. We focus on the role of spillovers as a channel of bargaining power that a country might have when asking for financial support from regional lending institutions. We build and present a new database that records both the dates on which official meetings took place, relevant statements were released and the timing of the announcements regarding loan disbursements. This database allows us to assess the defining role that announcements of future actions have in mitigating spillover costs. In addition, we study the design of lending arrangements within a recursive contract between a lender and a sovereign country. When accounting for spillover costs, arising from the borrower to the creditor, we find that it is in the lender's best interest to back-load consumption by giving more weight to future transfers in order to reduce contagion cost. Subsequently, we test and validate our theoretical predictions by assessing the effect of spillovers on loan disbursements to programme-countries and by juxtaposing lending conditions imposed by the IMF and the European mechanisms.
Keywords:
Regional lending mechanisms; currency-union; spillovers; spillover cost; loan disbursement; lending condition; loan announcement; lending program; Loans; Consumption; Credit default swap; ESM disbursement; lending terms and conditions; lending agreement; IMF statement