Sharon Donnery: Resilience of Ireland's financial system is not 'limitless'

Addressing an online presentation hosted by the Institute of International and European Affairs, Ms Donnery spoke about risks, resilience and policy responses to Covid-19.

Ireland's financial system is stronger than a decade ago but its resilience is not limitless, the Deputy Governor of the Central Bank Sharon Donnery has said.

Addressing an online presentation hosted by the Institute of International and European Affairs, Ms Donnery spoke about risks, resilience and policy responses to Covid-19.

She described the crisis as a truly global event, unprecedented in terms of size and speed, with uncertainty greater than that seen in 2008 and 2009.

“The OECD has warned of the worst peacetime recession in a century. Their latest numbers, in a single wave scenario, estimate global economic activity to fall 6% this year. In contrast, at the peak of the 2008/2009 financial crisis, global growth fell by 1.7%," she said.

“The macro financial risks of possible defaults, rising risk premia, tightening financial conditions and increased debt burdens are coupled with the structural vulnerabilities we are exposed to as a small open economy. In addition, other risks have also not disappeared. The ongoing uncertainty surrounding Brexit negotiations is a serious concern.”

Ms Donnery also highlighted the range of actions which have been taken over the last three months to support households and businesses through the crisis.

"Central to our pursuit of price stability, the current aim of monetary policy is to help ensure the continued supply of credit to the economy through the crisis and to aid its recovery from the shock."

This week the Central Bank of Ireland produced its mid-year Stability Review which warned that the longer-term impact of Covid-19 has yet to fully materialise and that people will struggle to meet their financial commitments and some firms will not re-open.

Governor Gabriel Makhlouf said: "Unlike the experience of a decade ago, the financial system is not the origin of the current challenges but, like the rest of the economy, it is affected by them. We are perhaps only at the end of the beginning of seeing those challenges emerge," he said.