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The banking crisis in Ireland

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FSI Crisis Management Series  |  No 2  |  27 October 2020 by  Patrizia Baudino, Diarmuid Murphy and Jean-Philippe Svoronos PDF full text (947kb)  |  53 pages Executive Summary (92 KB, PDF) This paper covers the banking crisis in Ireland that started in 2008, which stemmed from a combination of macroeconomic developments, risky bank practices and unsustainable fiscal policies. In line with the scope of this series, the paper focuses on the policy response. This involved the restructuring of the banking sector, requiring measures to restore bank capital, address asset quality issues and ensure

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FSI Crisis Management Series  |  No 2  | 
27 October 2020
PDF full text
 (947kb)
 |  53 pages

This paper covers the banking crisis in Ireland that started in 2008, which stemmed from a combination of macroeconomic developments, risky bank practices and unsustainable fiscal policies. In line with the scope of this series, the paper focuses on the policy response. This involved the restructuring of the banking sector, requiring measures to restore bank capital, address asset quality issues and ensure the provision of funding. Several rounds of stress tests, deleveraging plans and the provision of central bank liquidity, as well as the creation of an asset management company, were among the key measures put in place. The Irish banking crisis offers important lessons. One is the need to recognise the limits of emergency liquidity assistance and the boundary between such assistance and fiscal support. Others concern bank restructuring and the best modalities for it. Finally, some legacy issues remain, for instance those related to the remaining stock of non-performing assets.

JEL classification: E58, F33, G21, G28, G33

Keywords: bail-in, bank failure, bank restructuring, crisis management, emergency liquidity assistance, NPLs, promissory notes, resolution

International Settlement
The Bank for International Settlements (BIS) is an international company limited by shares owned by central banks which "fosters international monetary and financial cooperation and serves as a bank for central banks". The BIS carries out its work through subcommittees, the secretariats it hosts and through an annual general meeting of all member banks. It also provides banking services, but only to central banks and other international organizations. It is based in Basel, Switzerland, with representative offices in Hong Kong and Mexico City.

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