Behind the Data – Have Irish banking groups become more integrated in the euro area?

Stefano Tocchetti*
April 2026

This Behind the Data investigates the evolution of foreign claims by Irish banking groups, with a particular emphasis on claims on counterparts located in the euro area. It finds that over the last decade, credit to euro area counterparts has grown steadily but remains below the euro area average.

Recent reports on euro area competitiveness and the European single market (Draghi, 2024; Letta, 2024) have renewed focus on tighter financial integration and the completion of the Banking Union. As a key component of financial integration, cross-border bank lending within the euro area has been part of this discussion (Elderson, 2025; Buch, 2025). The European Banking Union was built around two main goals: improving the safety of euro area banks and establishing a single banking market. While the first goal has been successful, efforts to build a single European banking market have stalled over the past decade (Angeloni, 2024).

Research on cross-border banking has highlighted benefits and costs of foreign exposures (see, for instance, Allen et al., 2011). Cross-border claims increase the diversification of banks’ balance sheets and the sources of funding available to borrowers, thus improving private risk-sharing within the economy. Domestic banks are less vulnerable to domestic shocks if they lend to foreign countries, and foreign banks can step in and maintain credit availability for domestic borrowers when local banks are constrained. On the other hand, cross-border credit flows can be more volatile during periods of financial stress and might expose domestic banks to foreign shocks.

This Behind the Data examines how the geography of Irish headquartered banks’ foreign assets has shifted over the past two decades, with a particular focus on the euro area. Using BIS Consolidated Banking Statistics, trends in intra‑euro area claims can be distinguished from total foreign claims and claims vis-à-vis the United Kingdom, the largest counterpart area of Irish banks. This helps us understand whether recent changes reflect deeper European financial integration or a rebalancing of international activity. The article finds that while lending to UK counterparties has been declining since the Global Financial Crisis, lending to euro area counterparties has more than doubled over the last decade. Despite this growth, claims on euro area residents as a percentage of total assets remain below the euro area average.

The Global Financial Crisis abruptly reversed euro area financial integration that had followed the first EU rules on banking and the introduction of the euro. Foreign claims held by euro area banks went a from a peak of EUR 11 trillion in 2008 Q1 to a trough of EUR 7.6 trillion in 2013 Q4.

Similarly, the banking crisis in Ireland led to a significant reduction in foreign assets of Irish domestic banks and a reorientation of their balance sheets toward domestic activities (Baudino et al., 2020). In the aftermath of the crisis, the restructuring of Irish banks led to consolidation from six into three banking groups, with overall smaller total assets and more focused on domestic counterparties. Foreign claims as a share of total consolidated assets declined from a peak of 46 per cent in 2008 Q3 to 31 per cent by the end of the EU-IMF financial assistance programme in 2013 Q3 (Chart 1).  By contrast, the contraction in the share of foreign claims starting in 2020 was the result of a substantial expansion in claims on Irish residents, mainly increased claims on Irish households and higher reserves held at the Central Bank of Ireland², rather than a decline in foreign claims.

Intra-euro area claims declined dramatically after 2008, with the value of Irish banks’ outstanding claims on euro area contracting by 79 per cent between 2008 Q1 and 2013 Q4, and total foreign claims declining by 66 per cent in the same period. From a wider European perspective, the decline in intra-euro area banking activity prevented the euro area from benefiting from the risk diversification, risk sharing and efficiency gains associated with cross-border banking (Emter et al., 2018).  

The Changing Geography of Cross-Border Claims

The foreign portfolio of Irish banks appears more diversified compared to a decade ago, with UK exposures having notably reduced. As of 2025 Q3, Irish banks’ claims on the United Kingdom stood at EUR 46 billion, down from a peak of EUR 171 billion in 2007 Q2 (Chart 2). Unlike claims on other counterpart areas, claims on the United Kingdom have continued to decline even after the end of the Global Financial Crisis. Despite this, United Kingdom remains the largest foreign borrower for Irish banks, likely owing to a significant presence in Northern Ireland and close economic ties between Ireland and the UK.  

Cross-border claims on euro area counterparties have been the main driver of a modest recovery in foreign claims of Irish banks in the last 10 years. Focusing only on cross-border claims booked from Irish offices, claims on the euro area are now the most significant source of international exposures for Irish banks, reaching EUR 28 billion in 2025 Q3, more than double the level of 2013 Q4. Their share of total consolidated assets has increased by roughly 4.3 percentage points, reaching 8.1 per cent in 2025 Q3³. 

Irish banks’ intra-euro exposures are below those of their euro area peers. While the gap with other euro area countries has narrowed over the last decade, Irish banks’ balance sheet share of euro area assets remains roughly half of the euro area aggregate (Chart 3).

These euro‑area claims are largely booked from Irish offices rather than through local branches or subsidiaries. This pattern is common across the euro area and is caused, among other reasons, by limited cross‑border consolidation and the absence of country‑blind legislation (Lenoci and Molitor, 2024), pointing to slow progress toward a true banking union in the euro area.

Sectoral Composition and Geographic Concentration

Irish banks’ claims on euro area counterparties are primarily focused on the official sector and other banks, although claims on the non-bank private sector are growing. As of 2025 Q3, only 25 per cent of total claims by Irish banks against euro area residents were to the non-bank private sector, as compared to 39 per cent for the public sector and 37 per cent for banks. The share of the intra-euro area portfolio made up by non-bank claims is lower than the euro area average, which stands at 52 per cent⁴. Despite making up a smaller share of credit to the euro area, claims vis-à-vis non-banks have trended upward over the last decade. This has been largely driven by non-financial corporations (NFCs), which in 2025 Q3 accounted for 80 per cent of non-bank credit.  Growth in claims on euro area NFCs has stalled since 2022, likely owing to monetary policy tightening and an overall moderation of credit dynamics in the euro area (Chart 4).

While the overall foreign portfolio of Irish bank’s is more diversified compared to a decade ago, their euro area exposures remain geographically concentrated. Irish banks have diversified claims on euro area-sovereigns but claims on euro area banks and the non-bank private sector are more concentrated, with France being the dominant counterparty (Chart 5). Concentration is assessed using the Herfindahl–Hirschman Index (HHI), which in this context indicates how diversified Irish banks’ euro area claims are across countries: a higher HHI means claims are concentrated in a few countries, a lower HHI means they are more evenly distributed. Ireland’s HHI indicates the domestic Irish banking sector has the second highest concentration of intra-euro claims among euro area reporting countries (Chart 6).

Conclusion

The data show limited progress toward deeper integration of Irish banks in the euro area. Their claims on residents of other euro area member states have grown slowly but steadily both in absolute terms and as a share of total consolidated assets, since their low point in the 2010s. Even though the UK remains the counterpart area with the most total foreign claims, the euro area has become the most important counterpart area for direct cross-border claims booked from Irish offices. Other banks and governments remain the euro area counterparts to which Irish banks supply the most credit, while credit to the euro area non-financial sector has more than doubled over the last decade.

However, Irish banks’ foreign and euro area claims as a percentage of total consolidated assets remain below those of their euro area peers, reflecting a greater degree of home bias. More progress is needed to achieve an integrated market for retail banking, complete the banking union and reap the benefits of risk sharing, risk diversification and more resilient access to funding that such union would bring.

*Email [email protected] if you have any comments or questions on this note. Comments from Barra McCarthy, David Duignan, Simone Saupe, Nicholas Kaiser and Siobhán O’Connell are gratefully acknowledged. The views expressed in this note are those of the authors and do not necessarily reflect the views of the Central Bank of Ireland or the ESCB.   

1. More generally, the data on an ultimate guarantor basis adjusts data on an immediate counterparty basis for any cross-border risk transfer. BIS (2019) defines risk transfers as “credit risk mitigants that shift a bank’s credit exposure from the immediate counterparty to a guarantor, to another counterparty or collateral that guarantees the claim. The guarantor is the ultimate party to a contract, who is contractually bound to assume responsibility for the performance of the contract in the event of default by the immediate counterparty. The CBS recognise four types of risk transfer: parent guarantees to branches, explicit guarantees by parents and third parties, credit derivatives, and collateral”.

2. See Table A.4.2 of Credit and Banking Statistics.

3. These figures exclude securities issued by euro area institutions, such as the European Stability Mechanism (ESM) and the European Financial Stability Facility (EFSF), which in the CBS are reported as claims on International Organisations.

4. The euro area average only includes Germany, Austria, Belgium, Finland, France, Italy, Greece, Portugal, Spain. Due to data availability, the ultimate guarantor definition has been used.