Quarterly Bulletin Q3 2013

71
EU-IMF Financial Assistance Programme
– Tenth Review
Overview
The tenth review of Ireland’s European Union/
International Monetary Fund (EU/IMF) Financial
Assistance Programme took place from 23
April to 2 May 2013. A range of issues were
discussed during the mission, including recent
developments in the Irish economy, progress
on the three main programme fronts - fiscal,
financial sector and structural reform - and
preparations for programme exit. Delivery in
terms of programme conditions and
quantitative targets was strong in the first
quarter of 2013 1 - the period under review.
Following the conclusion of the visit, the
External Partners commented that “Ireland’s
program remains on track”. However, while
acknowledging that significant progress has
been made in repairing the financial sector, and
restoring sustainability to the public finances,
they cautioned that “remaining challenges
require continuing policy efforts” 2 .
Discussions during the review focused on the
following issues:
• The macroeconomic situation and outlook.
• Progress by lenders in offering sustainable
mortgage solutions to distressed
borrowers.
• Management of distressed small and
medium-sized enterprises’ (SMEs) loans.
• Roll out of the Personal Insolvency
framework.
• Banks’ future profitability.
• Preparatory work for the bank stress tests.
• Job creation and activation measures.
• Implementation of Budget 2013.
• Preparations for exit from programme
financing.
Compliance with Financial Sector
Conditions (Q1 2013)
Work to advance the financial sector reform
agenda advanced during the first quarter of
2013. The main actions are outlined below.
The Central Bank (‘the Bank’) continued to
monitor and report on the Prudential Capital
Assessment Review (PCAR) banks’ 3 strategies
to address non-performing mortgage loan
arrears. It also continued its assessment of
banks’ progress against Key Performance
Indicators (KPIs) and bank-specific targets. As
part of the new Mortgage Arrears Resolution
Targets (MART) framework, a public target
requiring the principal mortgage lenders 4 to
offer a substantial number of restructuring
arrangements by the end of 2013 was
announced in March (this was a structural
benchmark for end-March 2013). The banks
are required to have proposed sustainable
solutions for 50 per cent of mortgage debtors
in arrears of more than 90 days by the end of
the year. Interim targets of 20 per cent by end-
June and 30 per cent by end-September have
also been set 5 .
The review of the Code of Conduct on
Mortgage Arrears (CCMA), which included a
1 For example, two structural benchmarks were met. These involved establishing a public target requiring the principal mortgage
banks to offer a substantial share of sustainable restructuring arrangements during 2013, and requesting an external Basel Core
Principles (BCP) assessment in support of efforts to strengthen financial supervision and regulation. A revised date was agreed with
the Troika in respect of a study comparing the cost of drugs, prescription practices and use of generics in Ireland with comparable
EU jurisdictions. This has since been completed, and the report was published at the end of June.
2 http://www.imf.org/external/np/sec/pr/2013/pr13161.htm
3 AIB, Bank of Ireland and Permanent TSB.
4 ACC Bank, AIB, Bank of Ireland, KBC Bank Ireland, Permanent TSB and Ulster Bank.
5 http://www.centralbank.ie/press-area/press-releases/Documents/Approach%20to%20Mortage%20Arrears%20Resolution%20-.pdf