While risk-taking is not excessive at present, at least in part due to the Central Bank’s interventions, there is some tentative evidence of increased risk-taking in some areas, facilitated by the broader macroeconomic environment.18 In other words, financial conditions are evolving to incentivise banks to shift up the risk curve, in both credit and treasury portfolios.
For example, Irish retail banks are increasing their exposure to global leveraged finance markets and increasing use of non-price based incentives domestically – such as payment holidays for new mortgages – where the Central Bank has some concerns. Regulators have interesting and challenging roles.