Buying Bonds Makes the Central Bank the State’s Largest Financial Institution

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The scale of the central bank’s pandemic bond purchases last year made it – on a technical basis – the state’s largest financial institution.

The Central Bank’s annual report shows that the total assets on its balance sheet increased by € 25.1 billion, or 22%, to reach € 141.5 billion in 2020.

This is mainly due to the increased accumulation of Irish government debt as part of the European Central Bank’s (ECB) massive € 1.3 trillion emergency pandemic relief program.

Central Bank holdings for 2020 eclipsed assets held by UK bank Barclays and Bank of Ireland, traditionally the Republic’s two largest financial institutions.

The regulator is the largest holder of government bonds, accounting for around 26% of outstanding debt.

Ireland’s national debt is expected to reach around € 239 billion this year due to financial support spending linked to the pandemic, making it one of the largest national debts – per capita – in the euro area.

It is estimated that the ECB’s increased intervention in the sovereign bond market has reduced the cost of borrowing for the government by 80 basis points compared to 10-year benchmark bonds, implying a saving of direct interest of about 192 million euros per year.

The Central Bank’s report showed that its profit for 2020 fell 67%, which had an impact on the surplus it paid into the treasury. This amount fell to 665.7 million euros, the lowest since the start of the financial crisis.

Enforcement

In its report, the Central Bank said it completed 139 enforcement actions last year, resulting in financial penalties of more than € 123 million and 16 exercise bans.

In this context, it imposed a fine “at the highest level of its sanctioning powers” on KBC Bank Ireland amounting to just over 18.3 million euros for the role of the lender in the mortgage tracker scandal. .

“The fine reflected the severity of the impact of KBC’s failures on its clients, including a significant surcharge and the loss of 66 properties, which in some cases were avoidable,” he said.

The much-publicized € 38million application against Ulster Bank for the mortgage scandal and the Central Bank’s € 4.1million reprimand against Davy Stockbroker for his involvement in a bond transaction in 2014 will be included in next year’s report.

The regulator said it had received 202 protected pieces of information about financial entities operating in Ireland, up slightly from the previous year. He did not provide information as to whether any of these disclosures led to formal investigations.


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