Central Bank leaves controls on bank credit unchanged

Bank acknowledges growth in some area but say credit conditions remain subdued

Philip Lane, governor of the Central Bank. The bank has left its controls on bank credit unchanged for another quarter.

Philip Lane, governor of the Central Bank. The bank has left its controls on bank credit unchanged for another quarter.

 

The Central Bank has left its controls on bank credit unchanged for another quarter. The bank said its countercyclical capital buffer (CCyB) rate on Irish exposures, in other words the additional buffer against bad times, would be kept at 0 per cent for the second quarter of 2018.

“This decision has been made in the context of subdued aggregate credit growth but also noting that credit growth to the household and NFC (non-financial corporation) sectors has recently returned to positive territory,” it said.

The CCyB rate is reviewed by the bank on a quarterly basis and can be increased up to 2.5 per cent if the Central Bank deems lending to be excessive.

The Central Bank said that underneath the aggregate credit figures a number of important trends are evident “and cyclical pressures can be seen in some areas”.

Household credit

It noted that aggregate household credit had turned positive in recent months while annual net lending for house purchase had also turned positive for the first time since mid 2010.

“ The strong increases in new mortgage lending of recent quarters now seem to be translating into positive growth in mortgage credit overall. While the absolute amounts of lending remain modest, this rate of growth will be closely monitored over the coming quarters,” it said.

The Central Bank said that more robust rates of credit growth were also evident in the consumer credit category although these have moderated somewhat recently.

The bank said its recent review of the Irish mortgage market did not point to the need to change the fundamental elements of its mortgage lending restrictions or suggest that house prices were unjustified given economic developments elsewhere.

“Nonetheless, with double-digit year-on-year increases continuing, developments will require careful monitoring,” it said.

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