Honohan says banks curbing lending before stress tests
SOME eurozone banks are curbing their lending to boost their performance ahead of stress tests later this year, Patrick Honohan has said.
But the Central Bank governor said he didn't believe this was happening in Ireland.
The ECB will publish health tests of Europe's biggest banks before it takes over their supervision in November.
There are concerns that lending will remain constrained until then and hamper the moderate economic recovery that is taking shape.
"At the moment, across Europe, there is a lot of concern that banks have been holding back lending to look good for tougher stress tests," Prof Honohan told a conference in Dublin.
"To some extent, some banks are doing that, but I don't see that in Ireland."
Prof Honohan told the Future of the Irish Economy conference, organised by the European Commission, that the bailout programme did exactly what it was designed to do.
He claimed it provided a safe harbour in which Ireland could retreat and deal with the crisis.
"The key to the return of market confidence to the extent that now exists has undoubtedly been rigorous adherence to fiscal goals," Prof Honohan said.
"Over the three years, a continuation of the momentum of fiscal adjustments already initiated in 2008 has brought the public finances back within striking distance of EU norms.
"In cushioning the impact of the loss of market confidence resulting from the crisis, the programme did no more and no less than was promised on the tin. The rest is up to us."
But he also said that repairing the banking sector had taken much longer than expected.
"Even with troika pressure the complex bankruptcy law reforms have come slowly; and on the ground, the mortgage arrears and wider impaired assets problems are only now showing clear signs of coming under control. These represent the major unfinished business as Ireland exits the programme," he said.
The IMF's Ireland mission chief Craig Beaumont said he didn't want to be a "wet blanket" but reforms were still needed in Ireland.
"Unlke many countries undertaking continued reform and adjustment, the range of options are fewer because of the combination of debt problems and financial sector problems," he said.
He said commercial property loans were the next priority for the banks to tackle and he said productivity growth would be modest in the coming years.
"Things are looking bright after Ireland's successful programme, but the whole process will take at least the next decade for a full recovery to be achieved," he said.
Antonio Garcia Pascual, economist with Barclays Bank, said Ireland had graduated from the programme with high public debt and questions remaining about the banking sector.
He said if NAMA did not break even as planned, that would also add to public debt levels.
The conference included several high-profile speakers, including Central Bank chief economist Lars Frisell, Fiscal Advisory Council head John McHale and the IMF's Mr Beaumont.