Financial Stability Review 2019 II

The small and open nature of the Irish economy means that it is always particularly vulnerable to shocks arising abroad. The Central Bank judges that the main risks to domestic financial stability continue to stem from external developments and that these external risks are elevated at the moment.

Structural risks include the ongoing possibility of a disorderly Brexit and the risk of sudden changes in the international trading and tax environment. Cyclical risks stem mainly from the possibility of an abrupt tightening in global financial conditions. The fall in global interest rates since the last Review mitigates near-term debt sustainability concerns, but can also build vulnerabilities in the medium term, by underpinning further increases in already high asset valuations and a continued search for yield in global financial markets. Domestically, an economy close to capacity and continued lending growth point to a gradual build-up of cyclical risk, with the potential for pro-cyclical risk taking in the absence of a disorderly Brexit.

See also:

• Macro Financial Reviews
• Press Release on Financial Stability Review
• The Macrofinancial Outlook for Ireland: risks, resilience and policy - Governor Gabriel Makhlouf