Announcement of annual review of macroprudential capital buffers

• 6 banks identified as being Other Systemically Important Institutions in annual review
• Capital buffers for each institution established
• Buffers are a tool to reduce potential impact of a systemically important institution’s failure

Read the announcement.

The Central Bank of Ireland today announces the outcome of the annual review of Other Systemically Important Institutions (O-SII) in Ireland. The O-SII buffer aims to increase the resilience of institutions that are systemically important by requiring them to hold additional capital. The objective of the O-SII buffer is to reduce the potential impact of a systemically important financial institution’s failure on the domestic economy.

The framework was first introduced in December 2015 and is a key element of the Central Bank’s macroprudential toolkit.

The Central Bank is responsible for identifying O-SIIs for Ireland and setting buffer rates.  As a member of the Single Supervisory Mechanism (SSM) O-SII buffers are implemented in conjunction with the European Central Bank (ECB). 

The list of O-SIIs and the associated buffer rates must be reviewed on an annual basis. This announcement is the outcome of the 2017 annual review process.

Arising from this review, six institutions have been identified as systemically important in Ireland and buffer rates have been applied to these institutions. The review has resulted in two changes to the existing policy stance, namely:

1. Permanent tsb plc has not been identified as an O-SII due to its reduced size¹ and;
2. The buffer applied to Citibank Holdings Ireland Limited has been increased to 1 per cent due to its increased importance.

Otherwise, the institutions identified as O-SIIs, following the 2016 review, and the associated buffers have not changed.

2017 O-SII and associated phased-in buffer requirements

Formally, this decision was taken by the Governor following discussion at and advice from the Macroprudential Measures Committee (MMC). Identification of O-SIIs followed the European Banking Authority guidelines. The systemic importance of each institution was assessed based on the criteria of size, importance to the economy, significance of cross-border activities and interconnectedness with the financial system. Consideration was also given to features of each bank’s business model which might influence its importance to the domestic economy. The applicable buffers were calibrated based on this assessment.

Notes

• The Central Bank has been designated under S.I. 158 of 2014 as the national authority responsible for O-SII identification and associated buffer rate settings.
• As a member of the Single Supervisory Mechanism (SSM) these decisions are made in conjunction with the European Central Bank (ECB) and are without prejudice to any powers of the ECB under the SSM Regulations with respect to O-SII buffer rate setting.
• O-SII identifications and rate decisions were first announced in 2015 and have since been reviewed on an annual basis.
• More information on the Macroprudential Measures Committee is available here
• The Central Bank is the designated national macroprudential authority in Ireland.  In recent times, several macroprudential measures have been activated via the banking system. These include: borrower-based measures such as mortgage rules; the counter-cyclical capital buffer (CCyB); other systemically important institution (O-SII) buffer; and reciprocation of macroprudential policy measures taken by other Member States.
  

  ---