Sat. Sep 24th, 2022

Washington, 27 July 2022

IMF Country Report No. 2022/238 : Ireland: Financial Sector Assessment Program-Technical Note on Insolvency and Creditor Rights

This note analyzes select aspects of the system for insolvency and creditors’ rights in the context of an overall assessment of the Irish financial sector. It focuses on two areas: (i) the use and effectiveness of the corporate restructuring regime (examinership) and (ii) the resolution of mortgage related NPLs. Corporate restructuring was considered particularly relevant given that the authorities are currently in the process of amending their insolvency system to incorporate the provisions of the European Directive on Preventive Restructuring Procedures (the “EU Directive”) and have recently adopted a new debt resolution regime for small and micro-sized enterprises. The mission team also focused on the resolution of mortgage related NPLs, given that they constitute 46 percent of all NPLs (total loans) in the retail banking system and pose a challenge to the effectiveness of the overall system for debt resolution and creditors’ rights. This analysis has been conducted against the international insolvency standard (the “Standard”), where relevant.2

 


IMF Country Report No. 2022/239 : Ireland: Financial Sector Assessment Program-Technical Note on Financial Safety Nets and Crisis Management

This Note assesses the bank recovery, resolution, and crisis preparedness regime in Ireland. It analyzes laws, policies, procedures, institutional capacity and coordination arrangements for bank failure resolution and for managing financial distress and crises. The assessment is focused on banks under the direct remit of the Central Bank of Ireland and does not evaluate the role played by the European Central Bank and the Single Resolution Board for Ireland’s largest banks. The Note also assesses steps toward adopting a recovery and resolution regime for insurers. The Note is guided by international standards, in particular the Key Attributes of Effective Resolution Regimes for Financial Institutions promulgated by the Financial Stability Board.

 


IMF Country Report No. 2022/240 : Ireland: Financial Sector Assessment Program-Technical Note on Banking Supervision

Supervision of less significant institutions (LSIs) is largely effective in Ireland. The Central Bank’s supervisory approach to LSIs is intrusive and well-developed supervisory tools are appropriately applied. To enhance the capacity of supervisory tools and approaches, the supervision leverages on its membership in the Single Supervisory Mechanism (SSM). Supervision has sufficient rigor, although some gaps in the enforcement framework yet to be covered by the legislative changes planned for 2022.2 The supervisory responses to changing conditions are timely and agile. The expertise of supervisors is expanding with the development of the market, although keeping up its pace can be a challenge. The independence of banking supervision is strong in practice, and benefits from the safeguards of the SSM. Recent efforts to enhance cooperation between prudential and conduct supervision of banks (Central Bank’s “One Bank” approach) has raised the quality of supervision, although scope remains for further enhancements to unleash the full potential of integrated prudential and conduct supervisory functions framed by strong cooperation arrangements and operational processes.

 


IMF Country Report No. 2022/241 : Ireland: Financial Sector Assessment Program-Technical Note on Financial Interconnectedness of the Market-Based Finance Sector

This technical note1 investigates the interconnectedness between the market-based finance (MBF) sector in Ireland and the rest of the financial system, with a view to assessing potential financial stability risks. The MBF sector, the largest component of the financial system, totals over 14 times GDP and is comprised of the funds sector—both money-market (170 percent of GDP) and investment funds (850 percent of GDP)— as well as other financial institutions (OFIs), which comprise of special purpose entities (SPEs, 240 percent of GDP) and a catch-all category entitled “OFI residual” (160 percent of GDP). Chapter I provides an overview of the potential financial stability risks associated with the MBF sector, with a focus on the funds sector, and places it in its domestic and global context. Chapter II maps out the interlinkages between the non-banks, banks, and the real sector using network analysis to assess the strength and direction of interconnectedness. Chapter III delves into the balance sheet exposures of major categories of Irish funds, the largest component of the MBF sector, to further assess channels of risk transmission. The analysis focuses on a network of complex inter-sectoral financial relationships, based on a range of lending and borrowing instruments, and several findings emerge.

 


IMF ountry Report No. 2022/242 : Ireland: Financial Sector Assessment Program-Technical Note on Oversight of Market-Based Finance: Investment Funds and Special Purpose Entities

This technical note considers the regulation and supervision of the market-based finance (MBF) sector in Ireland. The Irish MBF sector is dominated by investment funds (IFs), including money market funds (MMFs), while special purpose entities (SPEs) continue to represent a sizeable proportion of assets. Reflecting Ireland’s position more broadly as an open and internationally oriented economy, the MBF sector generally holds non-Irish assets on behalf of non-Irish investors, although domestic interlinkages exist primarily through property funds. This combination makes the sector important from a financial stability perspective both within Ireland and globally, and underlines the importance of robust regulatory oversight and a strategic approach to managing the interaction of domestic and international financial stability objectives.

 


IMF Country Report No. 2022/243 : Ireland: Financial Sector Assessment Program-Technical Note on Oversight of Fintech

Ireland’s fintech sector is growing in importance through the entry of innovative new players and digital transformation of incumbents’ business models and products. The Irish Government has adopted an action plan for the development of Ireland’s international financial services sector that includes several initiatives of relevance to fintech. Meanwhile, the Central Bank of Ireland (the Central Bank), the integrated financial services regulator, engages with new entrants with a view to securing consumer interests and safeguarding the resilience of the financial system, thereby harnessing the benefits of fintech while managing additional risks it may generate. The largest sub-sector is represented by payment and e-money institutions (PIEMIs). Recent data show most Irish adults are using digital payments multiple times a week, while 24 percent use their mobile phone for contactless payments. Ownership of crypto-assets is also on the rise, especially among young adults. Beyond payments and crypto-assets, fintech activities are developing on a smaller scale in areas such as insurance and investment management. Meanwhile, the importance of market support firms, including cloud service providers (CSPs), continues to grow.

 


IMF Country Report No. 2022/244 : Ireland: Financial Sector Assessment Program-Technical Note on Insurance Regulation and Supervision

Ireland’s insurance sector is characterized by high penetration and density in both the life and the non-life sector, which, however, stems largely from outward cross-border business (Table 2). In terms of premiums, Ireland hosts the fourth largest insurance sector in the European Union (EU), and assets managed by the insurance industry amount to 117 percent of the GDP, compared to 72 percent for the EU average. The large majority of Irish insurers are subsidiaries of international groups and often have significant interlinkages with related entities within the same group. Extensive intra-group financial links could expose local entities to concentration and other risks. Cross-border business plays an essential role, and Irish insurers hold relevant market shares in other EU member states. Many firms operate on an ‘outward’ cross-border basis, so that in total less than 30 percent of premiums is written in Ireland.

Source – IMF (via email)