Irish banks not yet ‘stormproofed’, Central Bank says

Regulator warns risks remain in Irish banking system, particularly in IT

The Central Bank said a major concern for it remained the banking sector’s ability to deal with IT risks. Photograph: Matt Kavanagh

The Central Bank said a major concern for it remained the banking sector’s ability to deal with IT risks. Photograph: Matt Kavanagh

 

The restoration of the Irish domestic banking system is still only “partially complete” the Central Bank said on Tuesday, as it warned it is not yet convinced the sector is “stormproof”. The regulator also warned against a regulatory “race to the bottom”in terms of attracting post-Brexit financial services business to Dublin.

Speaking to the Association of Compliance Officers in Ireland, Ed Sibley, director of credit institutions supervision at the Central Bank, said “very material, tangible and quantitative progress” had been made in improving the capital and funding position of the domestic Irish banks over the last 10 years.

Issues clearly remained, however, he said.

“Domestically-owned banks are still rebuilding their capital bases, still have significant State ownership, and their balance sheets still have significant weaknesses and, therefore, remain vulnerable to shocks,” he said. “There continues to be much to be done.”

A big concern for the regulator remains the sector’s ability to deal with IT risks.

“Of all the risks facing the banking system in Ireland today, this is the one that concerns me most,” he said. “Threats abound and are increasing in complexity and the potential impacts are massive – and could impact on the banking system’s ability to deliver its core functions.”

Brexit

On the UK’s departure from the European Union, Mr Sibley said the bank was working hard with other regulators to ensure that there there “is no regulatory race to the bottom in the search for the crumbs of comfort that are falling from the Brexit plate.”

Ireland was in the frame again on Tuesday to win some business emanating from the UK, with Bank of America suggesting that Dublin was the “emergency default option” for the bank in the event of a hard Brexit.

However, Mr Sibley said he hoped relocating businesses would not be attracted by “different approaches to booking practices, treatment of internal models, expectations re substance and mind and management, and so on”.

“We are working collegiately within the SSM [the European Central Bank’s single supervisory mechanism], and the other European supervisory bodies and in bilateral discussions with other competent authorities to make sure that is the case,” he said.