June 16, 2020 / 1:44 PM / 2 months ago

Payment breaks account for 13% of Irish bank loan books: regulator

DUBLIN (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

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