The Central Bank of Ireland has published its Financial Stability Review, concluding that risks to Ireland’s financial system from the global environment have intensified, although the system is starting from a position of strength. It identifies a persistent global energy supply shock linked to the conflict in the Middle East, a potential correction in financial markets, vulnerabilities in parts of the global non-bank sector, and rising cyber risks as the main threats, with a prolonged conflict increasing the chance that several vulnerabilities could be triggered at once. For Ireland, a longer disruption to energy supplies would push up inflation, slow growth and raise costs for households and businesses, reflecting the country’s dependence on imported energy and international trade. The review also highlights high valuations in the artificial intelligence sector, increasing debt-funded investment and growing use of private credit to finance AI and technology companies, alongside heightened cyber risks tied to geopolitical tensions and rapid advances in AI. It adds that resilience should be protected through strong bank capital buffers, prudent lending standards and stronger operational resilience, while noting that public finances remain exposed because budget surpluses depend on corporation tax revenues and the budget would otherwise remain in deficit.

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