Central Bank Says Economy Needs More Help

16 Jun 2020 | 03.46 pm

Central Bank Says Economy Needs More Help

Financial Stability Review calls for policy actions

16 Jun 2020 | 03.46 pm

The Central Bank of Ireland has published the first Financial Stability Review (FSR) of 2020.

The FSR outlines the Central Bank’s assessment of the key risks facing the financial system, the resilience of the economy and financial system to adverse shocks, and the policy actions being taken to safeguard financial stability.

The Review states that companies will require access to liquidity and, in some cases, solvency support to reduce the risk that the productive capacity of the economy is permanently damaged.

Governor Gabriel Makhlouf (pictured) commented: “Unlike the experience of a decade ago, the financial system is not the origin of the current challenges but, like the rest of the economy, it is affected by them.  We are perhaps only at the end of the beginning of seeing those challenges emerge.

“As we have taken stock of what this means for domestic financial stability, there are three key messages emerging.

“First, the speed, size and pervasive nature of the economic shock have presented both immediate challenges and tighter financing conditions, as well as a sharp deterioration in the macro-financial outlook, with further downside risks for households, businesses, the public finances and the financial sector.

“Secondly, households, businesses and the financial system have entered into the current phase in a more resilient position compared to the onset of the financial crisis a decade ago.

“Third, the policy actions taken in the area of fiscal and monetary policy – as well as macroprudential and supervisory policy – have been necessary to mitigate the amplification of the immediate shock, enable the financial system to support households and businesses through the crisis, and to minimise the extent of longer-term difficulties.”

Makhlouf added that CBI is endeavouring to ensure  that borrowers are treated consistently when availing of payment breaks.

“It is in the interests of everybody that the banking system plays a sustainable role in minimising the extent of the downturn and contributes to the recovery,” he stated.

“However, some people will struggle to meet their financial commitments and some firms will not re-open.  Sustained and coordinated policy action will be required to reduce to the greatest extent possible the long-term effects of this crisis on people’s livelihoods and the economy as a whole.”

 

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