Bad loans in Irish banks are falling but remain among the highest in the Eurozone - European Commission
Bad loans in Irish banks are falling but remain among the highest in the Eurozone, the European Commission has said..
And the share of long term mortgage arrears continues to rise, it added
In a statement marking the end of the fourth post-bailout review, released this afternoon, the Commission also sounded a veiled note of caution over the source of the finance behind the €1.5bn of extra government spending announced for this year just days before the Budget.
It said it was being financed by higher-than-expected revenue, but noted that was mainly from “volatile” corporation tax receipts.
“The factors underlying the very buoyant and generally volatile corporate tax receipts still need to be ascertained,” the Commission said.
However, it appeared to give a general backing to the Budget, saying decisions are “likely to add to the already very strong growth momentum.”
But it said the deficit would have been significantly lower had the strong growth in revenues been put fully towards deficit and debt reduction.
And it reiterated that more needs to be done to improve spending in Health, proper funding for water infrastructure is also needed, as well as the enactment of the Legal Services Bill to drive down legal costs.
On the banks, the Commission said profitability continues to recover, but warned over the still high level of non-performing loans.
“Non-performing loans of domestic banks fell to 19.8pc of total loans in mid-2015, down from a peak of over 25pc in 2013. Nevertheless, they remain among the highest in the euro area and the share of long-term mortgage arrears continues to increase,” the Commission said.
“This still weighs on the ability of banks to support economic growth with new credit at more favourable interest rates.”
Lending to the private sector, especially small and medium sized businesses, remains subdued though there are early signs of new lending picking up.
It said the Central Bank’s mortgage lending rules, introduced earlier this year, should “underpin financial stability”