“A better understanding of the geography of risk will help us assess the financial stability implications of market-based financing”, Governor Philip Lane

• The Central Bank is pressing for greater supervisory convergence in the measurement of risks associated with market finance activities.
• Continued progress needs to be made on cooperation among central banks and financial regulators.
• Such cooperation needs to be underpinned by an improved framework for collecting, managing and sharing data

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In a speech to the International Capital Market Association Conference today, Governor Philip Lane focused the role of investment funds in the intermediation of international financial flows.

Commenting on the risks facing the investment industry in the international context, the Governor said: “Irish-resident collective investment vehicles are largely invested in offshore assets and are owned by mostly foreign investors. But our work at the Central Bank does not stop there. The geography of risk matters. Stress arising elsewhere can affect Irish-resident investment vehicles, and vice versa. It follows that the Central Bank has a role not only to understand linkages to the domestic economy but also to work with international peers in the oversight and supervision of non-bank financial intermediaries.”

The Governor also outlined the work being undertaken at the Central Bank to enhance effective regulation and supervision of investment funds, “Effective monitoring is a key pillar of good regulatory engagement” he said. “The Central Bank has led the way in collecting detailed data on collective investment vehicles and continues to prioritise initiatives that make data collection more efficient and effective. This serves to inform international policy discussions and, more importantly, to support various Central Bank teams for risk analysis and supervisory purposes.”

“I should also mention the Central Bank's important work developing methods to analyse the risks of investment funds under stressed scenarios. The aim is to inform supervisory and policy priorities by providing various measures of the leverage, interconnectedness and liquidity risk factors.”