The Central Bank of Ireland has published two financial stability assessments of the non-bank sector, covering Irish hedge funds and the availability and use of liquidity management tools (LMTs) by Irish-domiciled open-ended funds, alongside a separate good-practices document on LMT usage. The hedge fund assessment concludes that, despite the sector’s size at around EUR 400 billion in assets, its diversity and modest footprint in core global markets mean it is unlikely to pose systemic risks on its own, while the LMT assessment finds tool availability is now widespread but usage remains behind availability. Within the hedge fund sector, the analysis identifies vulnerabilities in leverage, liquidity and interconnectedness that could become financial stability risks if correlated with hedge funds in other jurisdictions pursuing similar strategies and exposures, with Relative Value and Credit strategies singled out for particular attention. For open-ended funds, the Central Bank links its work to the Financial Stability Board’s revised liquidity risk management recommendations and the updated European framework, noting that around 85% of open-ended funds in Ireland have at least one relevant LMT available but that a shift toward greater and more consistent use is still needed. The Central Bank expects the findings to inform strengthened surveillance and supervisory engagement and indicated it will engage internationally to deepen collective assessment of global non-bank vulnerabilities.
Central Bank of Ireland 2026-04-09
Central Bank of Ireland publishes non-bank stability assessments finding EUR 400 billion hedge fund sector unlikely to be systemic and calling for greater liquidity tool use
The Central Bank of Ireland has published two financial stability assessments of the non-bank sector—covering Irish hedge funds and the availability and use of liquidity management tools (LMTs) by Irish-domiciled open-ended funds—alongside a good-practices document on LMT usage. It finds that, while the hedge fund sector is unlikely to pose systemic risks on its own, vulnerabilities in leverage, liquidity and interconnectedness could become material if correlated with similar global strategies, and that although most open-ended funds have at least one LMT available, greater and more consistent use is needed. The Central Bank expects the findings to support enhanced surveillance and supervisory engagement and will engage internationally on global non-bank vulnerabilities.