Ireland's financial system at an increasing risk from global events, Central Bank warns

The Central Bank of Ireland have said that Ireland’s financial system is at an increasing risk from the global environment.

The Central Bank say that if things like the conflict in the Middle East and increasing cyber risks persist for longer than expected, there is potential for further vulnerability in Ireland.

Their Financial Stability Review was published on Thursday, and it argues that Ireland’s financial system is in a position of strength, but it needs to be protected.

The Central Bank say that while Government finances are currently strong, there are some serious vulnerabilities.

Most of the budget surpluses are reliant on corporation tax revenues; without this, it may end up in a deficit, leaving the country exposed.

As we have seen in recent months, the conflict in the Middle East disrupted energy supplies, and Ireland’s dependence on imported energy means the country is exposed to global issues.

Governor Gabriel Makhlouf commented on the review, saying: “Ireland's financial system and economy have shown remarkable resilience through multiple crises in recent years.

“However, the world is in an extraordinary period of change. While we start from a strong position, today’s report shows Ireland faces intensified risks from the global environment.

“These include the energy shock, high valuations vulnerable to adjustment, and cyber and AI threats.

“A sustained energy shock could intensify cost pressures for businesses and households. While the domestic economy is expected to continue growing, this will be modest growth, and it will have less room to absorb shocks.

“This is why preserving resilience is so critical right now. Strong capital buffers in our banks, prudent lending standards, and robust operational defences are essential to ensure the financial system continues to serve households and businesses.

“In an environment where growing global debt has reduced many countries' capacity to respond to shocks, prudent fiscal management is more important than ever.”