The Central Bank of Ireland is set to tighten rules on how many banks a pandemic-eased bank can lend.
His move is ahead of rising interest rates in July and September, despite growing concerns over the upcoming global recessionary financial markets.
The central bank said it would raise lenders’ key capital buffers to 0.5% this year and 1.5% by mid-2023 as the risk of a pandemic recedes.
In a semi-annual financial stability review, the central bank said the move “was not expected to have a significant impact on credit supply and economic activity.”
The so-called Countercyclical Capital Buffer (CCYB) is a share of a bank’s capital that must be readily available in the event of a future crisis, in addition to the basic capital requirements.
It was set at 1pc when it was introduced in 2018, but was reduced to zero in March 2020 to allow banks to lend more during a pandemic.
“We no longer think we need that help,” said Central Bank Governor Gabriel Makruh.
“Of course, if our economic and financial situation deviates significantly from our current core expectations, we will review our position.”
Makhlouf said the outlook for Ireland’s economy is “positive”, but inflationary pressures and future increases in European Central Bank interest rates increase “risk on global asset prices and affordable debt.” I warned.
“The economy will continue to grow until next year, despite slower and higher inflation rates and greater uncertainty in central forecasts,” he said Wednesday.
“There is also increasing cyclical pressure in the country, especially in capacity constraints that lead to higher housing prices and production costs.”
The central bank said in its review that banks had enough “margin” to increase their capital buffer to 1.5% and did not need to raise more capital.
The central bank said interest rates could be lowered again “with immediate effect” in the event of “risk crystallization.”
If “the cyclical risk is increasing”, it can rise by more than 1.5%.
Meanwhile, a review of the mortgage limit, which limits mortgages to 3.5 times the total salary of homebuyers, is still underway.
The European Central Bank plans to start raising interest rates in July. The central bank estimates that interest rates could rise by 1 percentage point and add € 65 per month to the repayment costs of trackers and standard floating rate customer loans.
Approximately 54% of unpaid mortgages are variable mortgages, and the median monthly installments for such loans rise from € 862 to € 927.
The central bank also warned that “after a relatively short period”, higher interest rates would begin to affect fixed-rate customers, given the short fixed-rate period.
The central bank is also still reviewing the growth of Irish real estate funds.
According to the International Monetary Fund, in a previous financial stability review last November, banks introduced borrowing limits and cash requirements on real estate funds with assets equivalent to about 40% of Ireland’s gross domestic product. Said that he was considering.
Both mortgage measures and real estate fund reviews are expected to end in the second half of this year.