Financial Stability Review 2025 II
Transcript of the video "Risks and Outlook for the Financial System (November 2025)" (PDF 103.96KB)
Global trade policy uncertainty remains above historical
norms but has fallen since the last Review, reflecting more clarity on tariff
levels in the short-term. Although recent developments have contributed to a
somewhat improved global growth outlook, risks facing
the financial system remain elevated. As equity markets reach record highs,
and corporate bond spreads are compressed, there is a clear disconnect between
economic uncertainty and the pricing of risk in financial markets.
Vulnerabilities within segments of the global non-bank financial intermediation
(NBFI) sector have the potential to amplify adverse market shocks, while
warning signs in private credit markets have brought lending standards by
non-banks into focus. Fiscal deficits persist in many advanced economies,
leading to growing sovereign debt burdens. The triggering of more than one of
these risks at the same time would be a particular challenge for global
financial stability.
The Irish economy is particularly exposed to
international developments in an environment of high uncertainty and shifting
global policy priorities. Over the medium and longer term, downside risks to
domestic economic growth remain significant, given Ireland’s structural
openness and reliance on US foreign direct investment (FDI). Government
finances are overly reliant on corporation tax receipts, and the need to
address infrastructural deficits must be balanced with sustainable levels of
spending growth. Despite significant exposures to global developments, Irish
households, businesses and financial institutions currently have relatively
healthy balance sheets and the domestic banking system has the capacity to
absorb a severe shock to the economy.
Financial Stability Review 2025: II | pdf 1443 KB
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