Central Bank pre-releases signed article from Quarterly Bulletin 1 2016

The Central Bank has pre-released a signed article from the forthcoming Quarterly Bulletin 1 of 2016, entitled ‘Interconnectedness of the Irish banking sector (PDF 943.14KB) with the global financial system’.

This paper uses granular and aggregate regulatory data to examine the interconnectedness of the Irish banking system with the global financial system and the key findings are:

• Interconnectedness in the financial system can have both positive and negative effects and a full understanding of these is important for policymakers.
• In Ireland, banks with a domestic retail focus have much lower levels of interconnectedness with the financial sector than the internationally-focussed foreign-owned banks, at least partly due to the intragroup exposures of the latter.
• Internationally-focussed banks are primarily exposed to other credit institutions and domestically-focussed banks to households and corporates. Both types of banks have a large proportion of their corporate lending with property-related sectors.
• The interbank network of credit exposures in Ireland is relatively sparse, with just a few key hubs, all of which are large global banks.
• Future data collection enhancements will be important for further analysis.