Central Bank may have to broaden 'narrow' view of economy
The Central Bank is considering deepening its analysis of non-financial sectors such as tourism, agriculture and pharmaceuticals to give a broader analysis of the workings of the economy.
The Central Bank Commission said the bank should consider widening the areas it looks at, and warns about, in its financial stability analysis.
It also said the bank should consider other risks when conducting its financial stability analysis, including the potential need in the future to signal that the economy could overheat.
The comments were contained in the latest minutes of the meeting of the Commission in May, held around a month before the Brexit vote.
The minutes show that the referendum was discussed at length by members, with Mark Cassidy, the head of the Financial Stability Division, briefing on the bank's plans to deal with the potential fallout of the vote.
"In relation to Brexit, Mr Cassidy provided an update on recent work undertaken in the bank regarding the risks associated," the minutes stated.
"The overall analysis contained in the two reports prepared for the Commission covered a broad range of potential scenarios and related economic and financial market effects; the potential impact on profitability and business models of financial-sector firms across all sectors, including banks, insurance and funds; implications of potential relocation of financial services firms and/or activities to Ireland; effects on the Central Bank's balance sheet; and also implications for the work of the bank including in relation to supervision, European regulatory policy, resolution, payments and the deposit guarantee scheme."
The minutes also noted that members of the Commission suggested that the bank should consider other risks when conducting its financial stability analysis. "While not an immediate issue, the need to signal the risk of recovery turning into potential over-heating, and the implications for policy, was something that could feature in future reports.
It was also argued that the greater risk lay in the lack of adequate housing supply; while another perspective was around the need to consider the risks that lie with intervention in the housing market," it stated.
"The possibility of more analysis on non-financial related sectors, such as pharmaceuticals, agriculture and tourism, was raised, in order to provide a full picture of the resilience of various building blocks of the economy."