IMF says state must do more on housing and shadow banking – The Irish Times


The International Monetary Fund (IMF) said the republic’s growth outlook remains positive, despite global headwinds from the war in Ukraine.

However, the Washington-based fund said the country needed to do more to address housing shortages and improve risk analysis of its very large market-based international financial sector, or so-called shadow banking. .

“Growth is expected to slow from 13.5% in 2021 to a still-robust 7.5% in 2022. the war in Ukraine. “, the IMF said after a staff visit to the state.

“Several pre-pandemic challenges remain, including housing shortages, infrastructure, gaps in social and green investments, and the need to strengthen [multinational groups’] internal linkages to broaden growth and make it more inclusive,” the IMF said.

The fund said the main indirect effects of the war in Ukraine on the state could be “substantial” due to rising inflation and weakening global demand. The Central Bank said on Thursday that Irish inflation could reach 10% this year.

The IMF also said the Republic needs to work more closely with international supervisors to strengthen regulation in its market-based financial sector. The state is home to the world’s fifth-largest ‘shadow banking’ sector with some €3.45 trillion in assets at the end of 2020, mostly in IFSC-based international funds that invest in debt, according to a report. Central Bank note released earlier. This year.

Ireland’s shadow banking sector has tripled in size over the past decade and is now nine times the size of the economy, driven by the growth of investments and money market funds that put money into securities. debt or have significant loans. There were €2.09 trillion in assets in these investment funds at the end of 2020 and another €630 billion in money market funds.

Most of the rest of the Irish sector is made up of special purpose vehicles used to house pools of international loans which are refinanced in the bond markets through a process called securitisation.

On the domestic banking sector, the IMF said the Irish financial sector had weathered the pandemic crisis well thanks to high capital buffers and effective policy support. This is thought to refer to government aid to households and businesses during the crisis, which serves to support their solvency.

“The impact of the pandemic on the financial situation of borrowers has started to dissipate, but uncertainty remains. The profitability of retail banks is always lower than that of its peers,” he said.

The IMF also noted that two retail banks – Ulster Bank and KBC Bank Ireland – are pulling out but new non-bank lenders are entering the market. “New risks have emerged, not least from the rapid expansion of non-bank lenders, which have tripled their share of new mortgages in the past two years. [to 13 per cent in 2021],” It said.


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