Irish credit unchanged despite price surge
The Central Bank of Ireland left banks' ability to lend unchanged yesterday, despite a sharp rise in property prices.
The countercyclical capital buffer requirement for banks was kept unchanged at zero, following a scheduled review, the regulator said.
Ratcheting up and down the buffers mean banks must hold more or less cash against loans, allowing the Central Bank to decide whether more or less is being lent into the economy at a given point in time, under powers brought in after the crash. The buffer is set at zero, meaning Irish banks don't have to hold any capital in addition to international standards.
Yesterday, the Central Bank said total credit to both households and businesses here remains in decline, but said lending has been picking-up for some time now, with new property-related lending in particular seeing large increases.
Pockets of positive credit growth are now evident in consumer credit, mortgages for principal dwellings, fixed-rate mortgage lending and credit to large enterprises, the bank noted. Despite that, the bank said that while residential property prices in particular have been increasing "relatively strongly, the countercyclical capital buffer would not appear to offer a "targeted measure to address broader property market developments".
That may be a sign that measures targeted more directly at the housing market, such as mortgage lending caps, may be ratcheted up if the regulator does want to dampen house prices rises.