Central Bank – Regulating for Stability and Positive Outcomes

Leverage limits for domestic funds to be introduced – call for urgent global coordination

Governor Gabriel Makhlouf today (Wednesday) opened the Central Bank of Ireland’s first Financial System Conference

The conference aims to bring together diverse perspectives from the Central Bank of Ireland's wide range of stakeholders – including industry leaders, consumer representatives, and international policymakers from Ireland and across the EU – to discuss and debate the forces shaping the financial system.

Governor Makhlouf welcomed Minister for Finance Paschal Donohoe TD, the President of the Eurogroup of Finance Ministers and Mairead McGuinness, Commissioner for Financial services, financial stability and Capital Markets Union, as well as Minister Sean Fleming TD, Minister of State at the Department of Finance, with responsibility for financial services, credit unions and insurance, Verena Ross, Chair of the European Securities and Markets Authority, Martin Moloney, Secretary General of IOSCO and Governor of the Banque de France, François Villeroy de Galhau.

Speaking at the event, Governor Makhlouf said: “We will discuss many topics over the next two days, ranging from consumer protection to climate risks, from agility and innovation to culture in organisations. 

I am looking forward to hearing different views, perspectives and challenges.

A particular focus for me is regulation of the non-bank sector.

Traditionally, the regulation of investment funds has been largely about developing and enforcing investor protection rules.  But we have to learn from history.  The lessons of the global financial crisis, the COVID-induced market shock of March 2020, and the UK’s recent LDI issue are clear. 

The sector is too big to ignore.  The financial system in Ireland is heavily weighted towards the non-bank sector.  The largest part of that sector is made up investment funds, money market funds and special purpose entities.  We have the third largest funds sector in the world.  To give a sense of scale, by the end of 2021, there were nearly 10,000 such entities, up from about 6,000 in 2016.  In the same period, asset values of these entities increased from approximately €3 trillion to €5.6 trillion.  

The financial stability risks are self-evident, as are the risks to investors, consumers and the community as a whole.

We need to think in an agile, forward-looking and connected way to address this.

Over recent years we have played a leading role in international efforts to develop solutions to address financial stability risks in the funds sector. Where solutions are developed and available, we should move quickly to implementation.

The Central Bank of Ireland is planning to introduce leverage limits for property funds connected to the domestic economy, but we cannot tackle the wider issue alone.  Global and European coordination is needed here, and, I suggest, urgently.”

View the full conference agenda (PDF 599.83KB). 

Read Governor Makhlouf’s speech.

ENDS

Further information:

Elaine Scanlon: [email protected] / 087 213 6313

Martin Grant: [email protected] / 086 078 7868

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