IMF says Ir­ish econ­omy re­bound­ing

The Pak Banker - - COMPANIES/BOSS -

An IMF staff team vis­ited Dublin, from Fe­bru­ary 29 to March 15 for the 2016 Ar­ti­cle IV con­sul­ta­tion dis­cus­sions with the au­thor­i­ties.

Based on the pre­lim­i­nary find­ings of this mis­sion, staff will pre­pare a re­port that, sub­ject to man­age­ment ap­proval, will be pre­sented to the IMF's Ex­ec­u­tive Board for dis­cus­sion and de­ci­sion. In ju­ris­dic­tions with fi­nan­cial sec­tors deemed by the IMF to be sys­tem­i­cally im­por­tant, in­clud­ing Ire­land, fi­nan­cial sta­bil­ity as­sess­ments un­der the Fi­nan­cial Sec­tor As­sess­ment Pro­gram (FSAP) are a manda­tory part of Ar­ti­cle IV sur­veil­lance, and are sup­posed to take place ev­ery five years. IMF FSAPs are cur­rently be­ing con­ducted in a num­ber of Euro area coun­tries in­clud­ing Ire­land, Ger­many, the Nether­lands and Fin­land.

An In­ter­na­tional Mon­e­tary Fund (IMF) mis­sion, headed by Daniel Hardy, vis­ited Ire­land dur­ing De­cem­ber 2015 and March 2016 to con­duct an as­sess­ment un­der the FSAP. The mis­sion held dis­cus­sions with the Cen­tral Bank of Ire­land (Cen­tral Bank); the Depart­ment of Fi­nance; rep­re­sen­ta­tives of other govern­ment agen­cies; and rep­re­sen­ta­tives of the non-govern­ment fi­nan­cial and non­fi­nan­cial sec­tors. It held dis­cus­sions also with the Euro­pean Cen­tral Bank;[1] the Euro­pean Bank­ing Au­thor­ity; the Euro­pean In­sur­ance and Oc­cu­pa­tional Pen­sion Au­thor­ity; and the Euro­pean Sys­temic Risk Board. It is an­tic­i­pated that a fi­nal re­port will be pre­sented to the IMF's Ex­ec­u­tive Board in late July.

The con­text is of an Ir­ish econ­omy that is clearly re­bound­ing. Since the cri­sis that be­gan in 2008, the bank­ing sys­tem has con­sol­i­dated and shrunk. Over the same pe­riod, the in­ter­na­tion­ally-ori­ented funds man­age­ment sec­tor has grown sig­nif­i­cantly. The reg­u­la­tory and su­per­vi­sory en­vi­ron­ment has been trans­formed by post-cri­sis re­forms, no­tably the es­tab­lish­ment of the Euro­pean Bank­ing Union.

The vul­ner­a­bil­i­ties of the Ir­ish fi­nan­cial sys­tem re­flect in large part the sig­nif­i­cant open­ness of the sec­tor and the econ­omy in gen­eral. Re­cent in­di­ca­tors of eco­nomic slow­down in some ma­jor coun­tries must be of con­cern to a coun­try such as Ire­land that is de­pen­dent on trade in goods and ser­vices, and for­eign di­rect in­vest­ment. In par­tic­u­lar, the tight link­ages with the U.K. fi­nan­cial sys­tem war­rant the on­go­ing at­ten­tion of the au­thor­i­ties. The cri­sis le­ga­cies of heavy pri­vate and pub­lic debt bur­dens (es­pe­cially for house­holds with high loan-to-value ra­tios), a per­sis­tent stock of im­paired loans, and high al­beit de­clin­ing un­em­ploy­ment mean that a large neg­a­tive ex­ter­nal shock could have a sig­nif­i­cant im­pact on the fi­nan­cial sys­tem.

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