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Europe > Ireland

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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 Staff Country Reports
Ireland: Financial Sector Assessment Program-Technical Note on Insurance Regulation and Supervision
International Monetary Fund. Monetary and Capital Markets Department
This Technical Note highlights Ireland’s Insurance Regulation and Supervision. Ireland’s insurance sector is characterized by high penetration and density in both the life and the non-life sector, which, however, stems largely from outward cross-border business. Irish insurers have proved to be resilient during the coronavirus disease 2019 pandemic, although the full effects have yet to be seen. Primary drivers of solvency ratios have been financial market and interest rate movements affecting insurers’ investment portfolios and liability valuations. The Central Bank has been expanding its analysis of climate risks and corresponding risk management practices in the financial sector. There is scope for the Central Bank to leverage its expertise and experience to promote further EU convergence on insurance oversight. The Central Bank has been very active in policy discussions at the European Insurance and Occupational Pensions Authority and is well placed to take a leading role in the efforts to achieve consistent application of EU legislation, and generally supervisory convergence, on the supervision of cross-border business; the supervision of intra-group transactions and group concentrations; and the supervision of captives.
Keywords:
solvency capital requirement; risk mitigation program; solvency ASSESSMENT; probability risk; financial condition; Insurance companies; Insurance; Solvency; 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 Staff Country Reports
Denmark: Financial Sector Assessment Program-Technical Note-Insurance Regulation and Supervision
International Monetary Fund. Monetary and Capital Markets Department
Denmark’s insurance sector is highly developed with a particularly high penetration and density in the life sector. Traditionally, work-related life insurance and pension savings are offered as a combined package, and life insurance companies dominate the market for mandatory pension schemes for employees. The high penetration explains the overall size of the insurance sector, which exceeds those of peers from other Nordic countries and various other EU member states. Assets managed by the insurance industry amounted to 146 percent of the GDP at end-2018, compared to 72 percent for the EU average.
Keywords:
ISCR; CR; risk assessment; business intelligence tool; insurance undertaking; DFSA plan; DFSA data; DFSA staff; DFSA supervision; insurance sector; insurance supervisor; covered bond; Insurance companies; Insurance; Solvency; Pension spending; Insurance supervision; Global
Cover IMF Working Papers
Sovereign Risk and Bank Risk-Taking
Mr. Anil Ari
I propose a dynamic general equilibrium model in which strategic interactions between banks and depositors may lead to endogenous bank fragility and slow recovery from crises. When banks' investment decisions are not contractible, depositors form expectations about bank risk-taking and demand a return on deposits according to their risk. This creates strategic complementarities and possibly multiple equilibria: in response to an increase in funding costs, banks may optimally choose to pursue risky portfolios that undermine their solvency prospects. In a bad equilibrium, high funding costs hinder the accumulation of bank net worth, leading to a persistent drop in investment and output. I bring the model to bear on the European sovereign debt crisis, in the course of which under-capitalized banks in defaultrisky countries experienced an increase in funding costs and raised their holdings of domestic government debt. The model is quantified using Portuguese data and accounts for macroeconomic dynamics in Portugal in 2010-2016. Policy interventions face a trade-off between alleviating banks' funding conditions and strengthening risk-taking incentives. Liquidity provision to banks may eliminate the good equilibrium when not targeted. Targeted interventions have the capacity to eliminate adverse equilibria.
Keywords:
WP; central bank; demand schedule; Risk-taking; Financial constraints; Banking crises; Sovereign debt crises; bank lending; solvency constraint; deposit demand schedule; representative bank; funding condition; Sovereign bonds; Bank credit; Solvency; Liquidity; Global
Cover IMF Staff Country Reports
Ireland: Financial Sector Assessment Program: Technical Note-Insurance Sector and Update on the Assessment of Observance of the Insurance Core Principles
International Monetary Fund. Monetary and Capital Markets Department
This Technical Note discusses the findings and recommendations made in the Financial Sector Assessment Program for Ireland’s insurance sector. Insurance in Ireland is well developed, diverse, and has a large international business presence. Insurance penetration in Ireland is almost three times the EU average. Many recommendations have been implemented by the central bank, with Solvency II now the solvency regime in Ireland. In total, 51 Supervisory Review Process guidance papers have been prepared setting out the central bank’s internal supervisory processes and procedures under Solvency II with reference to the technical standards and guidelines and the central bank’s prioritization framework. Forty-seven of these were complete as of the end of 2015.
Keywords:
ISCR; CR; holding company; variable annuity; Solvency II; corporate governance; risk management; Group firm; cost of capital; risk assessment; return on equity; group level; nonlife company; Group supervision; manage Central Bank risk; IMF finding; conduct risk; Insurance companies; Solvency; Insurance; Stress testing; Anti-money laundering and combating the financing of terrorism (AML/CFT); Global; Europe
Cover IMF Working Papers
Cleaning-up Bank Balance Sheets: Economic, Legal, and Supervisory Measures for Italy
Jose M Garrido
,
Emanuel Kopp
, and
Miss Anke Weber
To stabilize and bring down nonperforming loans (NPLs) in the Italian banking system, the Italian authorities have been implementing a number of reforms, aimed among others at speeding up insolvency and enforcement proceedings, strengthening bank corporate governance, cleaning up balance sheets, and facilitating bank consolidation. This paper examines the Italian banking system’s NPL problem, which ties up capital, weighing on bank profitability and authorities’ economic reforms. It argues for a comprehensive approach, encompassing economic, supervisory, and legal measures. The authorities’ reforms are important steps toward this end. The paper describes measures that could further support their actions.
Keywords:
WP; procedure; bank; security interest; Nonperforming loans; corporate restructuring; asset management companies; enforcement method; default probability; securitization transaction; NPL ratio; bank financing; asset quality; Banca delle Marche; NPL write-off; NPL problem; management experience; econometric methodology; Distressed assets; Loans; Solvency; Debt restructuring; Eastern Europe; Global
Cover IMF Staff Country Reports
Republic of San Marino: Selected Issues
International Monetary Fund. European Dept.
This paper offers elements of a possible strategy to deal with San Marino’s nonperforming loans (NPLs). It provides a brief overview of the reasons behind the accumulation of impaired assets by Sammarinese banks. This paper also presents some stylized facts regarding the nature and composition of San Marino’s problem loans. Further, it summarizes the experience of other small economies in dealing with weak banks and NPLs, with a view to drawing policy lessons. This paper also discusses recent measures implemented by the Sammarinese authorities to address weak financial institutions and their problem assets and examines the main impediments to deal with NPLs in San Marino’s legal and tax framework.
Keywords:
ISCR; CR; recapitalization plan; Sammarinese bank; asset quality; secrecy regime; transferring bank; bank secrecy status; insolvency process; debt enforcement procedure; recipient bank; banks default; Nonperforming loans; Solvency; Debt restructuring; Loans; Commercial banks; Europe
Cover IMF Working Papers
Recognizing the Bias: Financial Cycles and Fiscal Policy
Mrs. Nina T Budina
,
Mr. Borja Gracia
,
Xingwei Hu
, and
Mr. Sergejs Saksonovs
This paper argues that asset price cycles have significant effects on fiscal outcomes. In particular, there is evidence of debt bias—the tendency of debt to increase over the cycle— that is significantly larger for house price cycles than stand-alone business cycles. Automatic stabilizers and discretionary fiscal policy generally respond to output fluctuations, whereas revenue increases due to house price booms are largely treated as permanent. Thus, neglecting the direct and indirect impact of asset prices on fiscal accounts encourages procyclical fiscal policies.
Keywords:
WP; debt; price; housing cycles; public debt; private debt; debt bias; bias estimate; state dummy; growth shock; growth episode; output gap downturn; cycle episode; house-price shock; house price episode; house price cycles result in a public sector debt bias; cycles result in a public sector debt bias; house price cycle episode; Housing prices; Financial cycles; Global
Cover IMF Staff Country Reports
Ireland: Financial Sector Assessment Program-Detailed Assessment of Observance on the Insurance Core Principles
International Monetary Fund. Monetary and Capital Markets Department
This paper discusses findings of the Detailed Assessment of Observance on the Insurance Core Principles on Ireland. It highlights that the Central Bank of Ireland (CBI) has made significant progress in updating the regulatory regime, and the impending implementation of Solvency II (SII) is expected to address most of the regulatory gaps noted in the assessment. The Central Bank Supervision and Enforcement Act of 2013 has significantly enhanced CBI’s supervision and enforcement powers. CBI’s preparation for SII is well advanced, and a dedicated SII project has been in place since 2010.
Keywords:
ISCR; CR; life insurer; holding company; insurance group; business model; risk management; risk assessment; ERM framework; life assurance; group supervision; risk profile; impact insurer; line of business; reinsurance strategy; Insurance companies; Insurance; Solvency; Legal support in revenue administration; Global; Europe