In opening remarks launching its first Financial Stability Review of 2026, the Central Bank of Ireland said risks to the Irish financial system from the external environment remain elevated and have intensified since the previous review. It linked the shift mainly to the war in the Middle East and the resulting concerns over global energy pricing and supply, and said it is maintaining the Countercyclical Capital Buffer at 1.5 per cent to preserve resilience. The Bank said weaker global growth, higher inflationary pressures and a relatively contained market reaction to the energy shock leave scope for a sudden tightening in global financial conditions. It also highlighted amplification risks from leveraged non-bank financial intermediaries, high AI-related equity valuations, debt-funded AI investment, opacity and redemption pressure in parts of US private credit, and an evolving cybersecurity threat environment. Against that backdrop, it said the domestic financial system enters the period with strong aggregate balance sheets and modest leverage. The domestic banking system has limited direct exposure to core private credit activity and US large technology company equities, but would still face second-round effects and weaker borrower resilience if conditions worsen. The Central Bank said its next Quarterly Bulletin in June will present updated economic forecasts. It also said any fiscal response to the current energy shock should be time bound and targeted at those most affected, with sustainable fiscal policy supporting broader macro-financial resilience.
Central Bank of Ireland2026-05-27
Central Bank of Ireland says external risks to the financial system have intensified and keeps countercyclical capital buffer at 1.5 per cent
The Central Bank of Ireland, in its first 2026 Financial Stability Review, said external risks to the Irish financial system remain elevated and have intensified, driven mainly by the war in the Middle East and energy market concerns, and is maintaining the Countercyclical Capital Buffer at 1.5 per cent. It warned of potential sudden tightening in global financial conditions and highlighted amplification risks from leveraged non-bank financial intermediaries, AI-related equity valuations, parts of US private credit, and evolving cyber threats, while noting that Irish banks’ balance sheets remain robust with limited direct exposures. The Bank signalled updated economic forecasts in its June Quarterly Bulletin and said any fiscal response to the energy shock should be time bound and consistent with sustainable fiscal policy.