Behind the Data
Behind the Data shines a light on interesting financial and economic trends by taking a closer look at data collected by the Central Bank.
Bernard Kennedy and Jenny Quinn *
November 2023
This Behind the Data (BTD) presents initial estimates of carbon intensity within security holdings for the financial sector in Ireland, by institutional sub-sector. Results are broadly comparable to the euro area with some sub-sectoral differences and some evidence of concentrated exposures within Irish resident banks. Such indicators will benefit from methodological improvements and enhanced emissions disclosures, over time.
The increased incidence of extreme weather events and necessary transition policies to achieve net zero emissions within the globally agreed timeframe as at late-2023 means that the financial sector’s exposure to climate-related and environmental risks is now a supervisory priority for both the Central bank of Ireland and the ECB.
Siobhán O’Connell, Sinéad Murphy and Cecilia Sarchi
November 2023
Survey data on green loan instruments advanced by Irish resident credit institutions in recent years indicates an increasing level and range of green lending to households and non-financial corporations. There is evidence that households benefit from lower interest rates on these lending products.
Climate change and its impacts on society are an ever-increasing feature of daily life. Climate related risks and the transition to a carbon neutral economy are one of the key areas of focus in the Central Bank of Ireland’s future-focused Strategy.
Ciaran Meehan*
September 2023
New enhanced Credit and Debit Card Statistics providing an insight into domestic card spending on a county-by-county basis across Ireland reveals the high proportion of overall card spending undertaken in Dublin, and a growing preference for contactless card payments as a payment method.
The use of credit and debit cards as a payment method for goods and services is well established. Domestically, over 60 per cent of all non-MFI (i.e. Monetary Financial Institutions) payment transactions relate to credit and debit card transactions. Central Bank of Ireland’s pre-existing Credit and Debit Card Statistics were introduced in 2015 to inform national policy-making and to enhance understanding of the role of credit and debit cards in the domestic financial system.
Mark Mulholland *
July 2023
Euro area – rather than domestic – debt makes up the bulk of direct sovereign holdings by the Irish ICPF sector. While this domestic sector has diminished in importance as a holder of Irish sovereign debt, euro area ICPFs have become significant investors, highlighting the importance of further understanding the role of this broad sector in the market.
While growth in the domestic economy this year is expected to be slightly stronger than previously expected, there have been a number of challenges to the economic environment since early 2022 (Quarterly Bulletin, Q2 2023). In particular, the recent period of inflation and rising interest rates has led to significant market volatility as vulnerabilities built up in segments of the global financial system have been exposed (Financial Stability Review, H1 2023).
As insurance corporation and pension fund (ICPF) liabilities are often based on long-term entitlements due in the future, these sectors have traditionally been considered to have stabilising effects on markets during periods of instability as they can usually maintain assets despite short term fluctuations in prices. However, in certain circumstances, these sectors (and specifically, concentrations in behaviour at firm level combined with significant sectoral market holdings) could negatively impact the real economy by amplifying existing vulnerabilities and causing spillovers across markets.
Brian Golden, Aisling Kerr and Arya Pillai*
July 2023
While Irish-resident Investment Funds (IFs) undertook €82 bn of portfolio investment through Irish-resident Special Purpose Entities as at Q3 2022, granular analysis suggest domestic links are far smaller while risks are much the same as if positions were held directly.
This Behind the Data focuses on Investment Funds (IF) employing Special Purpose Entities (SPEs) to undertake all or part of their portfolio investment. A SPE is a company specially created to fulfil a narrow, specific purpose (see SPE explainer, 2019). The IF industry in Ireland covers a wide range of activities and 4% of the population choose to employ SPEs to hold part of their portfolios. This extra layer of complexity within fund structures can reduce transparency as to the exposures that IFs are undertaking. This BTD shines a light on these exposures with respect to the domestic economy, given the possibility of this being a channel for transmission of external shocks within an increasingly fragile macro-financial environment amid rising interest rates. This also fulfils part of a recommendation from the IMF’s Financial Stability Assessment Programme on Ireland in 2022 (see IMF FSAP, 2022). This Behind the Data describes the data, explores why a IF might employ a SPE, identifying which IFs do so, the Irish-resident exposures and what portion of these are linked to the domestic economy.
Jean Cassidy and Cecilia Sarchi*
June 2023
Different pricing behaviours characterise developments in interest rates across the three categories of mortgage-holding entities. Compared to other entity types, the non-lending non-banks display a higher concentration of loans at both the lower and upper ends of the interest rate distribution. The range of interest rates across their mortgages has also widened markedly since late-2022.
Recent increases in policy rates have put mortgage interest rates in the spotlight once again. As the dominant form of debt held by households, an increased mortgage repayment burden can have significant implications for borrowers in terms of potential financial distress. While the key ECB interest rates increased by 350 basis points between July 2022 and March 2023, official statistics show an increase of just 75 basis points in the average interest rate on outstanding Principal Dwelling House (PDH) mortgage loans over this period. We expect, however, a wide dispersion in exposure to monetary policy changes among mortgage borrowers (Byrne, et al. 2023). Furthermore, the official statistics cover mortgages held in banks only, thereby masking the experience of the cohort of mortgages held in non-bank entities.
Martina Sherman and Maria Woods *
April 2023
Lender credit enquiries data show increased demand for short-term credit among individuals and companies over 2022 and to end-February 2023 potentially attributable to costs of living, rate increases and an evolving retail lending market. Likely reflecting their less competitive pricing, non-banks have experienced a reduction in enquiries for mortgages but remain an important source of funding for companies, particularly for asset finance.
Understanding evolving credit conditions matters for Central Bank policy discussions and future economic growth. The post-pandemic period to early-2023 with elevated macro-financial uncertainty, tighter monetary policies and mixed economic data complicates credit analyses. Survey evidence and official credit statistics while useful, contain lags requiring complementary high-frequency data. This Behind the Data(BTD), therefore, examines daily credit registry enquiry data to reveal prevailing credit preferences and related lender activity in Ireland.
Jack Dempsey, Simone Saupe *
April 2023
Since September 2021, bank lending to Irish non-financial corporations (NFCs) experienced considerable growth. This novel analysis of aggregated and granular level Irish loan data shows that this upward trend was mainly driven by revolving loans drawn down by large enterprises, predominantly in the manufacturing and property-related sectors.
This Behind the Data (BTD) investigates the growth in Irish NFC lending between September 2021 and January 2023. Was this lending concentrated by firm type and/or economic sector? Did firms borrow long-term to finance productive investments or short-term to bridge liquidity shortfalls and finance working capital?
David Duignan, Catharina Lawless and Aisling Menton*
November 2022
This Behind the Data introduces new data on the mortgage repayments made by primary dwelling households in long-term mortgage arrears. The dataset, covering banks, retail credit and credit servicing firms, shows a significant proportion of these borrowers not making any repayment. The data also shows that where there is cooperation between a borrower and a lender, borrowers can exit LTMA.
A key focus of the Central Bank of Ireland (Central Bank) since the 2008 crisis, and again during the recent Covid-19 pandemic, was the resolution of non-performing mortgages. In recent years the level of mortgage arrears has declined, for a multitude of reasons including improving economic conditions, rising household incomes, supervisory engagement from the Central Bank, expansion of breadth of resolution options available to borrowers, and increased levels of proactive borrower engagement. Long-term mortgage arrears (LTMA) accounts are defined as those over one year in arrears.
Pierce Daly
November 2022
New Distributional Wealth Accounts (DWA) provide an innovative opportunity to observe the wealth distribution of households at a higher frequency. The quarterly dataset highlights that Irish household net wealth has increased significantly in recent years with net wealth inequality declining in the process. However, findings also point to a growing concentration of assets among wealthier households.
Household net wealth reached record highs in 2022, as evidenced in the latest Quarterly Financial Accounts (QFA). However, the QFA does not capture how this collective rise is distributed across households. This is important, as understanding the distribution of wealth is essential to assessing a wide range of questions, such as how economic shocks and subsequent policy responses may impact different households.
Matteo Lai*
January 2022
Since 2011, the Financial Stability Board has undertaken an annual exercise to quantify the subset of entities within the global non-bank financial sector that may pose bank-like financial stability risks and/or regulatory arbitrage (“narrow measure”).
Over the past decade, Ireland’s narrow measure almost tripled in size. The sector reached €3,449 billion by the end of 2020, making it the fifth largest in the world. In this Behind the Data we use granular data collected by the Central Bank to look beyond its size and reveal what types of activities and key characteristics led non-banks to be included in this measure.
Luke Kent and Róisín Flaherty*
January 2022
New data provides initial insights on the underlying financial exposures of insurance corporations and their policy-holders from investments in funds. The majority of underlying equities are issued in the US while underlying sovereign bonds are predominantly issued in the Euro Area.
The insurance sector is a key provider of long-term saving and investment products in the Irish economy, especially popular among households and pension funds.
Bernard Kennedy *
January 2022
In this Behind the Data, we show how the increase in banks’ cross-border financial assets since 2018 is concentrated in just two financial instruments and three institutions.
Although the impact of these loan migrations on domestic credit conditions is limited, there are some implications for supervision and macro prudential policy.
Stephen Sweeney and Allan Kearns*
December 2021
Irish retail banks granted the majority of loan forbearance to SME/corporate borrowers in sectors most affected by the pandemic over 10 months to September 2021. Forbearance agreements have focused mainly on short-term solutions with highest demand in H1 2021.
The speed and scale of the economic shock caused by COVID-19 was unique, and heavily impacted on household incomes and business revenues, particularly in sectors most affected by containment measures.
David Duignan and Allan Kearns*
July 2021
New data highlight that there is a cohort of mortgage borrowers facing repayment shortfalls at the end of their loan term. The data illustrate that the current levels of, and approach to, restructuring by financial service firms are not sufficient to solve the problems for all these borrowers.
A core focus of the work of Central Bank of Ireland since the 2008 financial crisis has been on the reduction of non-performing loans and mortgage accounts in long-term arrears, including by publishing data and research on the topic.
Jane Kelly, Christina Kinghan and Derek Lambert*
June 2021
While the proportion of new lending with an allowance fell during the pandemic, the type of borrower who got an allowance loan has remained broadly similar and there has been no sign of a deterioration in borrower credit quality since the pandemic.
The Central Bank of Ireland mortgage measures are aimed at enhancing the resilience of both borrowers and the banking sector and have been an important part of the Irish macroprudential policy framework since their introduction in 2015. These borrower-based measures operate by limiting the loan-to-value (LTV) and loan-to-income (LTI) ratios applying to new residential mortgage lending.
Siobhán O’Connell*
May 2021
The fast-growing green finance sector has an important role to play in the wider climate change response. In this Behind the Data we use data from both Central Bank and commercial sources to examine trends in the European green bond market and reveal who the main holders of green bonds in Ireland.
In recent years, the severity and frequency of events linked to climate change have been on an upward trend. Companies and governments have begun to take steps in their approach to financing green initiatives and supporting climate-related infrastructure (such as clean energy production) through the issuance of green bonds and other sustainable financial instruments.
Tiernan Heffernan, Barra McCarthy, Rory McElligott and Conall Scollard*
April 2021
Irish SMEs borrowed almost €4bn from non-bank lenders between 2019 -2020, across a wide variety of products. But which SME sectors are most reliant on this type of borrowing and what do we know about these lenders?
Non-bank lenders are not a new feature in the Irish market, but market commentary points to an increased presence over the past decade. They provide increased choice for borrowers, competition for banks, financing in market segments underserved by other lenders, and innovations in products and funding models.
Andrew Hopkins and Martina Sherman*
February 2021
New high frequency sectoral data from October highlight the swift change in consumer spending patterns as public health restrictions changed. Consumers quickly went online when shops closed, and immediately availed of hospitality services when they reopened in early December. February data highlight a return to similar spend levels as that of the previous Level 5 period.
The COVID-19 pandemic and ongoing public health restrictions have a dramatic effect on our day-to-day lives, along with a significant impact on how we spend and save our money. Understanding how and where consumers spend during future restriction changes is important, due to the significant impact of spending, and in turn consumption, on Ireland’s economic growth.
Kenneth Devine, David Mulleady and Ciarán Nevin *
January 2021
New data on occupational pension funds highlight concentrated holdings of investment funds and unit-linked insurance products. The impact of COVID-19 is evident in the volatile asset values, which sit 1.8 per cent below pre-pandemic levels.
Pensions have a key role in the economy, acting as the primary source of income to households in retirement and facilitating the long-term allocation of capital across economic sectors. They represent an important part of household wealth, and are comparable to mortgages in terms of significant lifetime financial decisions. As outlined by the OECD (2020) pension systems already faced challenges with aging populations, the low interest rate environment and the prevailing low yields on safe assets. The transition of pensions from defined benefit (DB) to defined contribution (DC) also means households are increasingly exposed to financial market shocks. The financial market volatility and economic shock associated with COVID-19 have compounded these issues.
David Duignan, Andrew Hopkins, Ciaran Meehan and Martina Sherman*
September 2020
New data on long-term mortgage arrears reveals a significant number are more than ten years in arrears, with such cases dating back to the last financial crisis.
The COVID-19 global pandemic has resulted in an unprecedented shock to Ireland’s economy and society in general. Approximately half a million private sector employees were reliant on government financial support at the end of August, while the economic outlook remains highly uncertain. Additionally, eight per cent of all principal dwelling house (PDH) mortgage accounts in Ireland had some level of arrears when entering the pandemic. While the arrears level has fallen considerably in recent years, it remains elevated, with long-term arrears cases accounting for a large share of those with repayment difficulties.
Allan Kearns, Andrew Campbell, Grace McDonnell, David Duignan, and Darren Greaney*
September 2020
New Central Bank data shows a 27% reduction in the value of active payment breaks to Irish borrowers since the end of June. Notwithstanding, 90,539 payment breaks remain active representing €14.7 billion or just over 9 per cent of loans to Irish borrowers.
COVID-19 has been an unprecedented shock to Ireland’s economy and has left thousands of households and businesses across the country on reduced incomes. In response to the COVID-19 pandemic, financial services firms in Ireland (including retail banks, retail credit firms, credit servicing firms and credit unions) have made payment breaks available to household and business customers. The initial applications for payment breaks, across all major types of loans (including mortgages, personal and business loans), peaked around mid-June. At that time, around €27bn or approximately 13% of all outstanding loan balances across these financial service providers had a payment break.
Tiernan Heffernan, Simone Saupe and Maria Woods*
July 2020
Deposit growth soared during the COVID-19 pandemic but economic uncertainty and changes to income levels are likely to determine future savings preferences.
As the economic impact of COVID-19 continues to unfold, the extent and duration of the downturn is highly uncertain. In the most recent Quarterly Bulletin, the baseline forecast is for underlying domestic demand to decline by 9.5 per cent this year. The future paths of household income, consumption and savings are of particular interest to policy makers, given their role in determining the shape of the economic recovery.
Allan Kearns, Andrew Campbell, David Duignan, Darren Greaney and Grace McDonnell*
July 2020
New Central Bank data finds that almost 160,000 payment breaks representing €20.1 billion in loans have been granted to borrowers in Ireland during the COVID-19 pandemic.
The COVID-19 pandemic has resulted in an unprecedented shock to Ireland’s economy and has left thousands of households and businesses across the country on reduced incomes. In response to the pandemic, financial services firms in Ireland have made payment breaks available to household and business customers. The significant scale of applications for payment breaks, across all major types of loans (including mortgages, personal and business loans), speaks to the unprecedented breadth of the shock triggered by the COVID-19 pandemic.
Rory McElligott, Martina Sherman and Maria Woods*
May 2020
New daily data suggest the demand for loans fell during March 2020 and the first half of April although overdraft applications, mainly for business purposes increased.
The demand for loans is important for understanding current and future economic developments, including demand for property and company investments. However, demand for certain types of loans, such as overdrafts, may indicate cash-flow pressures.
Andrew Hopkins and Martina Sherman
April 2020
New data reveals consumers spending less on cards and making fewer ATM withdrawals as COVID-19 pandemic continues.
While the outbreak of COVID-19 and associated public health measures has had a dramatic effect on day-to-day life in Ireland, it has also had a marked impact on how we are spending our money. New data published by Central Bank of Ireland has found that spending on credit and debit cards initially increased as the government announced the first set of containment measures on 12 March, before falling in the second half of the month. Meanwhile, the daily value of cash withdrawals from ATMs collapsed by 40 per cent over the same period.
Patrick Hughes and Siobhán O’Connell
January 2020
The Central Bank of Ireland publishes a wide range of data on investment funds. However, there is one fast-growing part of the sector for which there is limited information available. Exchange Traded Funds or ETFs are funds traded on stock exchanges the same way as equities. ETFs have experienced exponential growth both in Ireland and the euro area in recent years but information on the sector is lower compared to other fund categories, particularly with respect to household holdings. This “Behind the Data” piece fills that information gap and takes a closer look at the sector’s rapid rise.
Barra McCarthy, Tarek Elbay, Pierce Daly and Simone Cima
November 2019
Recent growth in corporate indebtedness has been identified by the European Central Bank, US Federal Reserve, Bank of England and Central Bank of Ireland as a potential financial stability risk. Specifically, they have highlighted the growing size of the market for leveraged loans. These are subprime loans provided to borrowers who already have significant debt, or have a poor or non-existent credit history. A significant portion of leveraged loans are syndicated, which means that there are multiple lenders providing the loan.
Faris Bader and Cormac O'Sullivan
June 2019
The wealth of the Irish household sector has surpassed the pre-crisis peak. This recovery, outlined in recent Quarterly Financial Accounts, primarily reflects developments in house prices, the accumulation of financial assets as well as the considerable deleveraging that followed the financial crisis.