Capital requirements for systemically important banks unchanged after review

The Central Bank of Ireland opted not to change capital requirements on six institutions deemed to be of systemic importance to the Irish economy.

A review of what are known as “other systemically important institutions” (O-SII) was consistent with the 2017 review and therefore didn’t require any new policy changes, the bank said on Monday.

Bank’s considered “too big to fail” include Bank of Ireland, AIB, Citibank Holdings Ireland, Ulster Bank Ireland, Depfa Bank and Unicredit Bank Ireland.

Bank of Ireland, considered to be the bank with most systemic importance, had its O-SII capital buffer kept at 0.5 per cent this year rising to 1.5 per cent in 2021. The maximum buffer available to the Central Bank is 2 per cent.

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Depfa Bank had a rate of 0 per cent because the bank is in “run down”.

The buffers, which become operational on June 1st 2019, are in place to mitigate risks associated with large financial institutions.

“Higher capital requirements for these institutions can reduce the probability, and impact, of their failure relative to non-systemic institutions, which should neutralise the greater impact the failure of an O-SII would have on the financial system and economy,” the Central Bank said.

The bank completes a review of systemically important institutions on at least an annual basis. It said the effect of Brexit will be reflected in future reviews.