DUBLIN, June 16 (Reuters) - Coronavirus-related payment
breaks agreed by Irish banks account for 13% of loan books,
Ireland's central bank said on Tuesday, adding that households,
firms and lenders are significantly more resilient than ahead of
the last financial crisis a decade ago.
Ireland's banks agreed to offer three-month breaks in March
and will extend them to six months for customers in need of
further temporary relief as the Irish economy emerges from its
coronavirus lockdown at a slower pace than most of Europe.
In its biannual financial stability report, the Irish
central bank said the full transmission of the shock from the
lockdown lies ahead, with liquidity pressures likely to evolve
into solvency pressures for some borrowers over time.
"COVID-19 will put pressure on banks' financial positions,
but improved resilience, supported by recent policy actions,
results in a banking system that is now better able to absorb,
rather than amplify, such a shock," it said.
"The banking system is expected to make losses, the scale of
which will depend on the evolution of the virus and the
'scarring' effects of this crisis."
At the end of May, there were almost 200,000 active breaks
across Ireland's five main domestic retail banks, relating to
outstanding loan exposures worth 24.9 billion euros, central
bank data showed.
Of these, 8 billion euros related to Irish-resident firms,
covering almost a quarter of all loans to such firms. A further
10.1 billion euros related to Irish mortgage holders, or 11% of
the banks' Irish mortgage portfolio.
The regulator warned that the banking sector has very
significant direct credit exposures to the coronavirus shock,
with close to two-thirds of commercial lending and half of
residential mortgages to borrowers in vulnerable sectors.
That makes the outcome for borrowers beyond the temporary
breaks a material consideration for financial stability, it
added.
(Reporting by Padraic Halpin
Editing by Gareth Jones)
