Our Role
The Central Bank’s role in contributing to financial stability has a legislative basis. The mandate is contained in the Central Bank Reform Act, 2010, which sets out as an objective of the Bank the ‘stability of the financial system overall’ (Item 24).
In addition, the Bank’s mandate for financial stability is derived from that of the European Systemic Risk Board (ESRB), and from its responsibilities as part of Eurosystem. According to the establishing regulation, the ESRB is responsible for ‘the macro-prudential oversight of the financial system within the Union in order to contribute to the prevention or mitigation of systemic risks to financial stability in the Union that arise from developments within the financial system...’ (Article 3.1). In addition, the statutes of the European System of Central Banks (ESCB) and the ECB.... ‘the ESCB shall contribute to the smooth conduct of policies pursued by the competent authorities relating to the prudential supervision of credit institutions and the stability of the financial system’ (Article 3.3).
Role of the Financial Stability Division
In carrying out our financial stability objective,we conduct macroprudential analysis and research relating to issues relevant to the stability of the Irish financial system. In addition, in participating in the ESRB, we contribute to macroprudential oversight within the EU. Primary responsibility for this analysis within the Bank rests with the Financial Stability Division. The division conducts its analysis on a system-wide level. However, our overall responsibility for financial stability also draws on the expertise and knowledge base of supervisors at the individual firm level, prudential analytics, financial markets, as well as divisions within the Economic Policy & Financial Stability Directorate such as Economic Analysis & Research. Thus financial stability analysis involves examining the stability of the overall financial system, its component parts, and the relationships between the financial system and the real economy.
Financial Stability Committee
The internal Financial Stability Committee (FSC) of the Bank both directs and considers the results of macroprudential analysis and specific financial stability issues. The FSC is composed of Deputy Governors, Directors and senior staff from relevant Directorates, including, economics, supervision and operations, and is chaired by the Governor.
A key focus of the Committee will be to identify actions that can be taken to mitigate risks to financial stability. Sources of financial instability may be addressed through the microprudential role of the Central Bank. The interaction of the supervisory functions with the Financial Stability Division therefore includes defining, calibrating and implementing microprudential instruments, as well as analysis.