In order to make this growing form of financial intermediation more resilient to shocks, the Central Bank is introducing new macroprudential measures for property funds. These are the first policy measures to be introduced under the third pillar of the Central Bank’s macroprudential framework, which covers non-banks. In particular, the Central Bank is introducing two policies that are part of its framework on property funds macroprudential policy:

  1. A sixty per cent leverage limit on the ratio of property funds’ total debt to their total assets (hereafter referred to as the “leverage limit”) and;
  2. Central Bank Guidance (hereafter referred to as “Guidance”) to limit liquidity mismatch for property funds.

The proposed measures aim to safeguard the resilience of this growing form of financial intermediation, so that property funds are better able to absorb – rather than amplify – future adverse shocks. In turn, this would better equip the sector to continue to serve as a sustainable source of investment in economic activity. The new macroprudential measures for property funds will enhance the resilience of property funds, with broader benefits for macroeconomic and financial stability.

Reflecting the macroprudential objective of the measures, the measures will apply to Alternative Investment Fund Managers (“AIFMs”) of Alternative Investment Funds (“AIFs”) that are domiciled in Ireland, authorised under domestic legislation, and investing fifty  per cent or more directly or indirectly in Irish property assets.

The Central Bank will provide a five year implementation period to allow for the gradual and orderly adjustment of leverage in existing property funds. The Central Bank expects that funds will make early and steady progress towards lower leverage levels over the implementation period. The Central Bank will provide an 18 month implementation period for existing funds as of 24th of November 2022 to take appropriate actions in response to the Guidance. The Central Bank will only authorise new funds if they meet the sixty per cent leverage limit, while it expects that property funds authorised on or after 24 November 2022 will adhere to the Guidance from inception.

For more details, please refer to The Central Bank’s macroprudential policy framework for Irish property funds.

For more details, please refer to the Guidance on redemption terms for Irish property funds.