Financial Stability Analysis 

Impact of legislative change

The passing of the Central Bank Reform Act 2010 had a considerable impact on the organisation of financial stability within the Central Bank.   The Financial Stability Division was expanded, and a significant research capacity was added.   The work of the Financial Stability Division is informed and enhanced by a high level of regular interaction with supervision divisions.  

A key element of the Reform  Act, in bringing the old Central Bank function of financial stability assessments together with the Regulatory microprudential supervision responsibilities, will pave the way for macroprudential policy to be undertaken in the future.  

Financial Stability work programme

Following this re-organisation of the financial stability function, the Financial Stability work programme was set out in the Banking Supervision: Our New Approach.   In particular, the work programme included: 

• Detailed micro level analysis examining the implications for non-financial corporation’s of changes in financing conditions, the availability of credit for small and medium-sized enterprises and the nature of distress in the Irish mortgage market. 
• Development of systemic risk assessment indicators. This includes risk assessment and the development of balance-sheet and market-based indicators for financial institutions and sovereigns. Such a framework will encompass network analysis of Irish banks.

Published work relating to the programme is available from the Research Technical Paper and Economic Letters series.   Recent analysis includes:

Economic Letters

• Unemployment and Labour Force Participation during the Recession - Thomas Conefrey
• Access to credit amongst SMEs: Pre and post-crisis evidence from Eastern Europe - Fergal McCann
• Scenarios for Irish House Prices - Gerard Kennedy and Kieran McQuinn
• The Outlook for Credit in the Irish Economy - Reamonn Lydon, Kieran McQuinn, Martin O’Brien & Martina Sherman

Research Technical Papers

• Impairment and Negative Equity in the Irish Mortgage Market - Robert Kelly, Yvonne McCarthy and Kieran McQuinn 
• Structural Breaks - An Instrumental Variable Approach - Denis Conniffe and Robert Kelly 
• Exploring the Steady-State Relationship between Credit and GDP for a Small Open Economy - The Case of Ireland - Robert Kelly, Kieran McQuinn and Rebecca Stuart

In addition, previous work was published in Financial Stability Reports.