Resolving Non-Performing Loans in Ireland: 2010-2018

Sharon Donnery, Trevor Fitzpatrick, Darren Greaney, Fergal McCann () and Micheal O'Keeffe
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Sharon Donnery: Central Bank of Ireland
Darren Greaney: Central Bank of Ireland
Micheal O'Keeffe: Central Bank of Ireland

Quarterly Bulletin Articles, 2018, 54-70

Abstract: In the last decade, the Irish banking system experienced a systemic crisis, which saw Non-Performing Loan (NPL) ratios rise to among the highest levels in the euro area, followed by a sharp decline in NPL ratios that has not been experienced in many comparable countries. This article highlights the sequence of policy interventions that were implemented by the Central Bank of Ireland as a response to this systemic crisis, beginning with the 2011 stress test and recapitalisation exercise that formed part of the Financial Measures Program. It then outlines how certainty around capital adequacy allowed policy to focus on the operational capacity and incentives of the banks and borrowers to resolve the NPL crisis in Ireland, highlighting the many specific measures adopted and lessons learned during the process. We finish with a discussion of the risks and remaining challenges, with a focus on the large share of late-stage mortgage arrears cases outstanding on Irish banks’ balance sheets in early 2018.

Date: 2018-04
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Persistent link: https://EconPapers.repec.org/RePEc:cbi:qtbart:y:2018:m:04:p:54-70

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