DUBLIN, April 16 (Reuters) - Ireland’s Central Bank has requested from government the power to activate the so-called systemic risk buffer that would impose additional capital requirements on banks to further protect the economy, Governor Philip Lane said on Tuesday.
Systemic risk buffers have been applied in some other European Union economies and Lane said, for Ireland, the aim would be to add resilience against tail risks, economic shocks that are unlikely to occur but that would have a significant impact on the economy and financial system if they did.
He said the main such risk facing Ireland - leaving aside Brexit - is its high dependence on multinational firms and that “if there were a persistent shock to that sector, the cumulative decline in economic activity would dwarf a normal cyclical recession.”
The calibration and timing of the systemic risk buffer - if activated - will be based on a thorough evidence-based assessment, Lane added, indicating that it will be left for his successor when he leaves to become the European Central Bank’s chief economist in June. (Reporting by Padraic Halpin; writing by Kate Holton; editing by Stephen Addison)