Edward O’Brien
Macro Prud Policy&Financial Stability
- Current Position
-
Senior Adviser
- Fields of interest
-
Financial Economics,Mathematical and Quantitative Methods
- Education
- 2001-2006
Ph.D Economics, University of Dublin, Trinity College
- 1997-2001
B.A. Economics and Geography, University of Dublin, Trinity College
- Professional experience
- 2022-
Senior Adviser, Macroprudential Policy and Financial Stability, European Central Bank
- 2014-2022
Adviser, Macroprudential Policy and Financial Stability, European Central Bank
- 2013-2014
Team Lead, Macroprudential Policy and Financial Stability, European Central Bank
- 2008-2013
Financial Stability Expert, Macroprudential Policy and Financial Stability, European Central Bank
- 2006-2008
Graduate Programme Participant, European Central Bank
- 2004-2006
Economist, Central Bank of Ireland
- Awards
- 2002
Irish Research Council for the Humanities and Social Sciences, Government of Ireland Scholar
- 12 February 2025
- WORKING PAPER SERIES - No. 3023Details
- Abstract
- Following the Global Financial Crisis of 2007-8, Ireland, Slovenia, and Spain set up public Asset Management Companies (AMCs), purchasing delinquent loans equal to 44%, 16%, and 10% of GDP, respectively. Though deemed successful, it’s unclear if this was de facto traditional capital and liquidity support. We show that AMCs have a systematic advantage in reducing pecuniary externalities and costs associated with loan delinquencies. AMCs enhance average returns to bank lending, promoting additional lending (bank lending channel) and improving corporate borrowers’ balance sheets (balance sheet channel). The welfare gains of well-designed and well-managed AMCs are between 0.2% and 0.5% of steady-state consumption, independent of whether they are financed through fiscal transfers or sterilized monetary transfers; AMCs can complement traditional fiscal and monetary policies in managing financial crises.
- JEL Code
- E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
G18 : Financial Economics→General Financial Markets→Government Policy and Regulation
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
- 17 November 2021
- FINANCIAL STABILITY REVIEW - ARTICLEFinancial Stability Review Issue 2, 2021Details
- Abstract
- Numerous European and national initiatives have been deployed since 2014 to reduce non-performing loan (NPL) stocks on euro area bank balance sheets. NPL ratios have fallen as a result, but very gradually, mainly thanks to sales to non-bank investors. Despite stronger market activity, prices paid by NPL investors have only improved marginally and continue to stand well below values assigned to NPLs by banks. One type of NPL that has proven particularly difficult to resolve is loans to non-financial firms that have borrowed from multiple banks – multi-creditor loans. Analysis of these loans relative to others finds lower provision coverage by the lending banks, reflecting more optimistic valuations by individual banks and limited recognition of the expected costs of multi-creditor coordination. This special feature proposes a strategy to overcome creditor coordination failures and costs, through the use of data platforms providing ex ante transparency to NPL investors. These, together with NPL securitisation, could substantially reduce the gap between the value of the loans booked on banks’ balance sheets and the prices offered by investors for NPL portfolios.
- JEL Code
- G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G32 : Financial Economics→Corporate Finance and Governance→Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill
- 24 May 2018
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 1, 2018Details
- Abstract
- The market for NPLs in Europe has become more active in recent years. The total amount and volume of transactions has continuously increased in the last three years, although part of the increase in volumes can be attributed to just a few large transactions. Italy and Spain account for the majority of the market turnover. However, the geographical scope of NPL markets in the euro area has also widened, with transactions starting in Greece in 2017 and in Cyprus in 2018. At the same time, market activity in more mature NPL markets, such as Ireland, has weakened against the backdrop of a diminishing supply of NPLs.
- 29 November 2017
- FINANCIAL STABILITY REVIEW - ARTICLEFinancial Stability Review Issue 2, 2017Details
- Abstract
- When banks judge that more value can be extracted by offering non-performing loans (NPLs) for sale rather than working them out themselves, potential investors cannot be sure that the credit quality of the assets is as good as the banks portray it to be. Such information asymmetries in the NPL market drive a wedge between the prices that investors are prepared to pay for NPLs and the prices that banks are prepared to sell them for. While information asymmetries can be overcome through investor due diligence, this requires specialist expertise and the costs of valuing NPL portfolios can be very high. As few investors have the resources to absorb such costs, barriers to entering the market are compounded. This appears to explain why the euro area NPL markets display the features of an oligopsony, a situation where there is a concentration of market power among a limited number of investors, which pushes traded prices even lower. At the same time, potential NPL investors can face coordination challenges when debtors have multiple loans with different banks. In such situations, investors must face the prospect of competing with other creditors for the debtor’s resources. While coordination between banks for common exposures may alleviate this problem, this too can be costly, weighing further on market prices. By offering the prospect of greater transparency in NPL markets, fostering wider investor participation and addressing coordination issues, NPL transaction platforms could help in overcoming all three of these market failures. The attendant improvement in market liquidity would allow banks to achieve better prices for NPL sales, preserve their capital and mitigate financial stability risks. This special feature outlines the desirable features of NPL transaction platforms and discusses their operational implementation.
- JEL Code
- G00 : Financial Economics→General→General
- 24 May 2017
- FINANCIAL STABILITY REVIEW - ARTICLEFinancial Stability Review Issue 1, 2017Details
- Abstract
- Large stocks of non-performing loans (NPLs) on euro area bank balance sheets continue to present risks to financial stability. Significant legal and administrative reforms have been undertaken over recent years in countries with high levels of NPLs to streamline insolvency proceedings and maximise NPL recovery values. Yet, the market continues to provide low NPL valuations that result in wide bid-ask spreads, thus impeding large-scale NPL sales. This special feature highlights the potential role and benefits of co-investment strategies (between the private sector and the state) for addressing NPLs. These co-investment strategies may reduce information asymmetries between buyers and sellers, thereby enabling transactions that might otherwise not occur, or facilitate sales at higher prices. Moreover, the proposed schemes are priced at market levels and may, therefore, be free of state aid.
- JEL Code
- G00 : Financial Economics→General→General
- 24 November 2016
- FINANCIAL STABILITY REVIEW - ARTICLEFinancial Stability Review Issue 2, 2016Details
- Abstract
- The high stock of non-performing loans (NPLs) on the balance sheets of euro area banks continues to be an important cause for concern for policymakers. Efforts to resolve this problem have increased significantly in the course of 2016, by supervisors and macroprudential policymakers alike. To relieve capital constraints, these efforts, however, must be complemented with structural reforms to recover the value of NPLs in some countries. Against this background, this special feature focuses on impediments to the functioning of a market for NPL sales. It highlights sources of informational asymmetry and structural inefficiencies. Among indicators of market failure, it distinguishes between supply and demand factors that impede market functioning. In light of the identified externalities, public policy responses are warranted to reduce the cost and duration of debt recovery while also addressing information asymmetries between better-informed banks and potential investors. In certain circumstances the establishment of asset management companies (AMCs) may help to accelerate the value recovery process for banks, while avoiding adverse macroeconomic side effects. Constraints on and limitations of AMCs are also reviewed in this special feature.
- JEL Code
- G00 : Financial Economics→General→General
- 28 May 2015
- FINANCIAL STABILITY REVIEW - ARTICLEFinancial Stability Review Issue 1, 2015Details
- Abstract
- The weight of non-performing exposures (NPEs) on the balance sheets of European banks is a cause for concern for policy-makers; yet resolving the issue presents a number of challenges. This special feature presents an overview of the scale of the NPE problem, highlights several operational aspects that are critical for effectively resolving the problem, and outlines the merits of various resolution strategies.
- JEL Code
- G00 : Financial Economics→General→General
- 27 November 2013
- FINANCIAL STABILITY REVIEW - ARTICLEFinancial Stability Review Issue 2, 2013Details
- Abstract
- This special feature briefly outlines the work currently being undertaken at the European Central Bank, in close cooperation with the national competent authorities of the participating Member States, for the assumption of supervisory responsibilities in November 2014. Following a short introduction, which summarises some of the features of the single supervisory mechanism, the preparatory developments are outlined, around five main themes, which reflect the organisation of the preparatory structures.
- JEL Code
- G00 : Financial Economics→General→General
- 29 May 2013
- FINANCIAL STABILITY REVIEW - ARTICLEFinancial Stability Review Issue 1, 2013Details
- Abstract
- Asset management companies (AMCs) have been established in a number of euro area countries to resolve large stocks of impaired bank assets following the financial crisis. This special feature describes some of the fundamental characteristics of such entities from a financial stability perspective. In particular, it reviews some of the lessons learned from the AMCs’ establishment and early operations, notably regarding the eligibility of banks and assets, which has implications for the size and capital structure of an AMC, as well as the valuation of assets to be transferred, strategies for their management and disposal and other operational issues.
- JEL Code
- G00 : Financial Economics→General→General
- 23 October 2007
- WORKING PAPER SERIES - No. 823Details
- Abstract
- This paper attempts to model the nominal and real exchange rate for Ireland, relative to Germany and the UK from 1975 to 2003. It offers an overview of the theory of purchasing power parity (PPP), focusing particularly on likely sources of nonlinearity. Potential difficulties in placing the analysis in the standard I(1)/I(0) framework are highlighted and comparisons with previous Irish studies are made. Tests for fractional integration and nonlinearity, including random field regressions, are discussed and applied. The results obtained highlight the likely inadequacies of the standard cointegration and STAR approaches to modelling, and point instead to multiple structural changes models. Using this approach, both bilateral nominal exchange rates are effectively modelled, and in the case of Ireland and Germany, PPP is found to be valid not only in the long run, but also in the medium term.
- JEL Code
- C22 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models &bull Diffusion Processes
C51 : Mathematical and Quantitative Methods→Econometric Modeling→Model Construction and Estimation
F31 : International Economics→International Finance→Foreign Exchange
F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics
- 2024
- SUERF Policy Brief, No. 1020
- 2021
- Nonperforming Loans in Asia and Europe— Causes, Impacts, and Resolution StrategiesResolution of Nonperforming Loans in the Euro Area
- 2018
- Banco de España, Revista de Estabilidad Financiera
- 2017
- Central Banking
- 2012
- Applied Economics Letters
- 2011
- Applied Economics
- 2010
- Applied Economics Letters
- 2010
- Applied Economics Letters
- 2008
- Economics Letters
- 2005
- Studies in Nonlinear Dynamics & Econometrics