central bank of ireland

The Central Bank is working hard to reduce the economic harm to businesses and households in the country

The COVID-19 pandemic is a global public health emergency with few precedents in history. In addition to the impact on public health, COVID-19 is also putting livelihoods at risk. The pandemic – and the necessary measures taken to mitigate it – is already having significant economic consequences on people, businesses and the wider economy.

In line with our mission of safeguarding stability and protecting consumers, the Central Bank is seeking to contain those economic effects and do everything in our power to protect consumers, households and businesses. Our actions, working with our European colleagues, span the full spectrum of our mandate.

The Central Bank has been working with financial services providers to help provide breathing space for customers who find themselves in financial difficulties due to the exceptional circumstances of COVID-19.

For example, banks and other financial intermediaries have announced that they will introduce three-month payment breaks on mortgages, and personal and business loans for some business and personal customers affected by COVID-19. Any customer facing potential difficulties in making loan repayments as a result of COVID-19 should contact their bank or credit service provider as early as possible. All of the existing protections for customers who face actual or potential financial difficulties continue to apply. The Central Bank’s consumer protection framework is designed to ensure that customers’ best interests are protected, particularly in times of financial difficulties. People who may be experiencing particular vulnerabilities as a result of the impact of COVID-19, for example through illness or loss of income, must be provided with whatever reasonable arrangements and/or assistance they need in dealings with regulated entities. All regulated firms should take a consumer-focused approach and to act in their customers’ best interests.

The Central Bank operates the Central Credit Register, which produces credit reports for lenders and borrowers on request. The Central Bank has clarified to lenders that a payment break agreed between a lender and a borrower as a response to COVID-19 is not, in itself, an event that is reportable to the Central Credit and should not be reported as a “missed payment”. Consistent with this guidance, these payment breaks should not be identified specifically on borrowers’ credit reports. The Central Credit Register does not produce a credit score; it simply records the information that is submitted by lenders on a monthly basis. It is factual, impartial information.

The Central Bank has also set out its expectations of how regulated insurance firms should treat their customers in light of the significant economic disruption caused by the COVID-19 public health emergency. The Central Bank has written to the Chairs and CEOs of both life and general insurance firms requiring them to take account of the challenging situation in which many of their customers find themselves and to put forward consumer-focused solutions for insurance payment breaks, policy rebates and claims in light of the emergency. The Central Bank has also set out its view that, where a claim can be made because a business has closed as a result of a Government direction due to contagious or infectious disease, the recent Government advice to close a business in the context of COVID-19 should be treated as a direction.

See also

• What is the Central Credit Register?
• How does the Central Bank of Ireland protect consumers?

On 27 March the Central Bank published a 'Dear CEO' letter setting out our expectations on insurance undertakings.

On 14 July we published a response to Deputy Pearse Doherty TD.

On 5 August we published 'COVID-19 and Business Interruption Insurance Supervisory Framework'.

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As part of the Eurosystem of central banks, together with the European Central Bank (ECB), we have taken action to ensure that the economic shock will be no longer and no deeper than it needs to be. Significant financial firepower is provided in the new Pandemic Emergency Purchase Programme of €750 billion until the end of the year. This is on top of the €120 billion announced earlier. This amounts to 7.3% of euro area GDP. The programme is temporary and designed to address the unprecedented situation we are all facing.

In addition, we modified some of the key parameters of the third series of targeted longer-term refinancing operations (TLTRO III). These operations support the continued access of firms and households to bank credit in the face of disruptions and temporary funding shortages associated with the coronavirus outbreak.

We have increased the volume of funds that banks can borrow from us in order to provide credit to firms and households by more than €1 trillion. This raises the total possible borrowing volume under this programme to almost €3 trillion. Banks can borrow at the most favourable rates the ECB has ever offered, provided that they continue to do their job of extending credit to the private sector.

The Central Bank has taken action allowing credit institutions to use the capital buffers they have built in recent years to support households and businesses. The Central Bank has released the Countercyclical Capital Buffer from 1% to 0%. In line with action taken by the European Central Bank’s (ECB) Single Supervisory Mechanism, of which the Central Bank is a part, the Central Bank has announced that credit institutions can temporarily use some of the supervisory capital buffers that they have built up in recent years.

These actions mean that credit institutions will be better placed to continue to serve the economy, households and businesses at this difficult time. For example, some businesses may be looking for increased access to credit, given the broader disruption in economic activity.

We have been clear in our expectation that credit institutions use the positive effects of these measures in support of the economy and not for distributions. This message was reinforced by the Central Bank, which in February 2021, in line with the ECB Single Supervisory Mechanism, recommended that credit institutions should exercise extreme prudence until 30 September 2021 when deciding on or paying out dividends or performing share buy-backs aimed at remunerating shareholders. On the basis of more reliable capital trajectories for banks in the context of a recently-improved macro-economy, the ECB Recommendation (ECB/2020/62) will expire after 30 September 2021 (See FAQ “Can Credit Institutions continue to pay distributions and variable remuneration in the current circumstances”).  

Over the past decade, the Central Bank has taken action to strengthen the resilience of the banking system. That additional resilience is there to be used to support households and businesses in times of unprecedented shocks.

We have clarified our expectations to regulated firms that they have appropriate contingency plans in place to be able to deal with major operational events, should they occur, and we are engaging with the financial sector to ensure that firms are identifying and mitigating the specific risk arising from this evolving situation.

Ireland is reliant on non-local systems providers and card schemes for the settlement of domestic and cross-border payments. The Central Bank is working closely with regulators in the other jurisdictions and monitoring whether these firms have appropriate contingency plans in place to be able to deal with major operational events, should they occur.

The banks and other payment service providers are responsible for continuity of payment processes and access to the payment systems for their customers. The Central Bank has been actively engaging with firms to understand their individual continuity arrangements and we continue to monitor the situation daily. In addition, the Central Bank is engaging with the sector as a whole via their industry body, the Banking and Payments Federation of Ireland (BPFI) to understand and support any sector wide contingency planning in terms of payment services.

Providing independent economic advice is a key strategic responsibility of the Central Bank and we continue to assess the impact of developments on the broader economy, as more information becomes available.

The spread of COVID-19 is a major shock to the economy in Ireland, the euro area and globally. Its impact is already being felt in homes and businesses around the country. In recent weeks many businesses have closed and thousands of people have lost their jobs, causing considerable distress and hardship for those affected. Unfortunately, many more will be affected in the weeks ahead.