Credit Conditions for Irish Households and SMEs

Jane Kelly, Rory McElligott, Conor Parle and Martina Sherman
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Rory McElligott: Central Bank of Ireland
Martina Sherman: Central Bank of Ireland

No 5/EL/21, Economic Letters from Central Bank of Ireland

Abstract: The impact of COVID-19 could have caused pro-cyclical tightening in credit supply conditions. If this occurred, it would have had the potential to amplify the macroeconomic downturn and/or inhibit the economic recovery. Significant policy actions have been taken to reduce this risk. The biggest factor that shaped credit outcomes at the start of the pandemic appears to have been a fall in demand, given the impact of health restrictions on economic activity. Some tightening has also been observed in credit supply conditions due to heightened macroeconomic risk and borrower specific factors, but the latest data suggest credit standards are currently broadly unchanged. New lending has now started to recover, albeit with trends diverging across borrower segments. Some forwardlooking risks to credit supply remain, including the possibility of an unexpected deterioration in credit quality on lender balance sheets.

Date: 2021-04
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