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Central Bank lending supports will stay in place until next year

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The Central Bank of Ireland HQ

The Central Bank of Ireland HQ

THE Central Bank of Ireland will maintain measures to boost bank lending through to at least the first of next year, it said in a review of some of its Covid-19 measures.

The Central Bank cut a buffer that it required banks to keep to zero from 1pc earlier this month in a move to boost lending.

The removal of the Counter Cyclical Buffer (CCyB) on its own enabled the release of €940m across the domestic banking sector and if used entirely to fund new lending, the capacity for new lending could range from €10bn-€16bn, according to the Central Bank.

"The committee discussed the time-frame within which the CCyB rate would be expected to remain at 0pc and agreed that no subsequent increase of the CCyB would be announced before the first quarter of 2021 at the earliest," according to the record of a meeting held on March 18 to discuss the issue.

"The committee agreed that this would balance the need to ensure maximum effectiveness of the buffer release, against the uncertainty of the macroeconomic forecasts regarding the impact of the virus," the Central Bank's Macroprudential Measures Committee minutes said.

It also said that it would keep all of the macroprudential policy tools under review.

Macroprudential policy is aimed at preventing a repeat of the financial risk-taking that led to the 2009 crash and the main Central Bank measures apply to mortgages where there are strict loan to income and valuation rules.

The latest forecasts from the Department of Finance indicate that the economy will contract by 10.5pc this year as a result of the coronavirus pandemic and lockdowns.

The largest bank in the State, AIB, said yesterday that it had made payment breaks of up to three months for 40,000 personal and business customers.

A range of measures to keep credit flowing to economies across the eurozone have been put in place in response to the pandemic outbreak and the European Commission this week said it would allow banks some flexibility in provisioning against bad loans.

Estimates are that banks in the bloc could need to make provisions of an extra €100bn this year.

Irish Independent