The IMF concluded its latest consultation review with Ireland, publishing its findings on its website. The report looks at the state of the economy and makes references to the banking sector.
The IMF report notes that the downsized banking sector is well capitalised and liquid, but profitability is under pressure. It notes non-performing loan (NPLs) are still high but reducing and household balance sheets have improved.
The report acknowledged that Ireland is vulnerable to a no-deal Brexit, with the IMF recommending that the government should let automatic fiscal stabilisers operate freely and provide targeted support to hard hit sectors.
The IMF noted that in such a scenario, a fiscal stimulus may be called for and in the case of a sharp credit contraction, the countercyclical capital buffer (currently set at 1.0%) could be released. To help reach the targets for NPL reduction, the IMF supports measures to accelerate legal processes, encourage creditor-borrower engagement, and enhance supervisory efforts.
The IMF welcomed the proactive use of macroprudential policy tools and endorsed the expansion of the toolkit with a systemic risk buffer and debt-based measures.
Source: www.businessworld.ie