Financial Stability Review 2024 I

Transcript of the video "Risks and Outlook for the Financial System (June 2024)"

The global economy continues to surprise in its resilience to higher interest rates, with short-term, acute macro-financial risks receding somewhat since the last Review. Inflation has continued to fall globally, but risks associated with higher interest rates could remain for longer than many have been expecting. Geopolitical tensions bring with them the risk of further shocks posing particular concern in open, globalised economies such as Ireland. A longer period of high interest rates could expose vulnerabilities in the global financial system.

Ireland has experienced sustained economic growth, albeit at a slower pace recently, with the labour market close to full employment. Households and businesses remain resilient to the ongoing adjustment to higher interest rates, with only modest increases in arrears and insolvencies up to now.

The domestic CRE market is in the midst of a sharp downturn, which will have implications for borrowers and lenders, but the Central Bank’s judgement is that the domestic banking sector is well placed to absorb – rather than amplify – this shock. The Central Bank today publishes a detailed assessment in the accompanying FSR Special Feature.

Irish banks posted strong profits last year, supporting their financial resilience as well as their capacity to build operational resilience. Against this backdrop, the Central Bank is maintaining the CCyB at 1.5 per cent, strengthening banks’ resilience to macro-financial risks, and continues to develop the macroprudential framework for non-banks.

See also:

• FSN No.3 Estimating the total value of Ireland’s commercial property stock (Shaikh)
• FSN No.4 The financial resilience of Irish CRE borrowers (Lambert, Mahony & McGeever)
• Previous Financial Stability Reviews
• Press Release on Financial Stability Review
• Opening Remarks by Governor Makhlouf FSR 2024 I
• FSR 2024 I Presentation