Central Bank of Ireland flags higher financial stability risks from trade and geopolitical uncertainty and keeps the countercyclical capital buffer at 1.5 percent

The Central Bank of Ireland published its Financial Stability Review, concluding that risks to Ireland’s financial system have increased amid rising geopolitical tensions, shifts in global trade policy and heightened economic uncertainty. Alongside its assessment of system resilience and macroprudential stance, the Central Bank confirmed that the Countercyclical Capital Buffer rate will remain at 1.5 percent. The review highlights Ireland’s exposure as a small open economy with high reliance on foreign direct investment, particularly from the United States, with uncertainty and weaker external demand identified as near-term transmission channels. Over the medium term, it points to potential impacts from any reduction in activity by US-owned multinationals in sectors such as pharmaceuticals and ICT, including possible effects on employment, tax revenue and investment, and warns that a material domestic slowdown could raise Irish banks’ credit risks and weigh on sentiment towards the Irish sovereign. The report also notes that global market volatility in April increased liquidity demands for certain Ireland-based investment funds while markets continued to function, and it underlines structural vulnerabilities in parts of the non-bank financial intermediary sector that could amplify future stresses, alongside ongoing cyber and climate-related risks. The Central Bank sets the countercyclical buffer rate for Irish exposures on a quarterly basis, following consultation with the European Central Bank.