Payment breaks have provided substantial and rapid relief to allow homes and businesses to absorb the shock and impact of Covid-19. The expiry of the guidelines do not prevent banks from engaging with customers who continue to experience difficulty beyond the deadline and all applicable consumer protection remains in place. Borrowers who cannot return to full repayments following the conclusion of their payment break should engage with their lender as early as possible and the Central Bank expects lenders to take a consumer-focused approach at this worrying time.
The longer term impact of Covid-19 on bank capital levels will take some time to materialise. However, some increase in non-performing loans is to be expected. It is nonetheless important to note the efforts undertaken by the Central Bank of Ireland and the EU institutions to ensure banks can absorb losses and continue to lend into the economy. The Central Bank has reduced the countercyclical capital buffer from 1% to 0% and it estimates this will free approximately €940 million of capital across the Irish retail banks to facilitate lending or help banks absorb losses.
At an EU level, a number of support measures have already been put in place. The European Central Bank announced that banks can temporarily operate below the capital conservation buffer and member states also passed a package of temporary measures designed to reduce the economic consequences of Covid-19 on the banking system and ensure that banks have sufficient capacity to lend.
The matter raised by Deputy Ó Cuív is very important but measures have been taken to try to ensure banks have the ability to continue to lend across this very important time. Due to measures taken in the past to deal with or reduce non-performing loans, our banks have funding on their balance sheet to deal with the matter raised by the Deputy.