Friday 23 June 2017

Impose levies on banks,urges IMF

Report also calls for NAMA to start selling off assets

Brian Lenihan and Dr TK Whitaker at a photocall to mark the 50th anniversary of the founding of the Economic and Social Research Institute yesterday. Photo: Tom Burke
Brian Lenihan and Dr TK Whitaker at a photocall to mark the 50th anniversary of the founding of the Economic and Social Research Institute yesterday. Photo: Tom Burke

Emmet Oliver

THE Government should consider hitting the Irish banks with an annual levy, the International Monetary Fund (IMF) has suggested.

It said bank levies like those being introduced internationally -- including in the UK -- should be considered here. The IMF didn't specify what type of levy was needed.

The organisation also wants the Government to come up with a scheme that allows banks to be wound up in an orderly fashion. It urged the Government to bring in legislation for a "special resolution" scheme.

"The powers under such a regime would be an important addition to the set of tools available to the authorities," said the Washington-based body.

The recent decision to force banks to raise their capital levels is welcomed in the report.

It said: "Financial sector weakness, the fall in real-estate prices and high unemployment could continue to reinforce each other.

"For this reason, current policy efforts to boost banks' capital ratios are important and will help to counter these tendencies."

But banks are deleveraging at present and this means that credit may not be as widely available as before, it reiterated.

"But deleveraging to reduce the loan-to-deposit ratio and banks' risk aversion will constrain lending and the pace of economic recovery, at least in 2010--11,'' the IMF argued.

"In this environment, the targets for SME lending need to be combined with strong prudential safeguards as the non-performing loans of this sector have grown rapidly."

The IMF, like many brokers in Ireland, is worried about the funding requirements of the banks in the second half of the year. It refers to "bunching" among the banks for funding.

This is a reference to the so-called "wall of worry" that is facing Irish banks later this year when they will have to roll over billions of euro in bonds.

Property

The IMF also wants to see NAMA begin to sell off its assets.

"NAMA should schedule an orderly disposal of the property assets acquired, aimed at reducing the large overhang of property in state hands, restarting market transactions, thus helping to normalise the property market,'' it said.

It is also strongly in favour of weaning the banks off government guarantees.

"The weaning of the banking sector from public support and its eventual return to good health will proceed at only a measured pace. In the interim, unforeseen fiscal demands may occur,'' said the IMF.

It added: "In this context, heavily bunched banks' funding needs and episodes of market volatility could generate unwelcome pressures and disruption."

Irish Independent

Promoted articles

Also in Business