Announcement of annual review of macroprudential capital buffers for banks

• 7 banks identified as being Other Systemically Important Institutions in annual review
• Capital buffers for each institution established
• Buffers are a tool to reduce potential impact of bank failure on the domestic economy

The Central Bank of Ireland today announces details of the review of the Other Systemically Important Institutions (O-SII) framework for banks in Ireland. The O-SII buffer aims to increase the resilience of institutions that are systemically important to the domestic economy by requiring these banks to hold additional capital to absorb losses. The objective of the O-SII buffer is to reduce the potential impact of a systemically important financial institution’s failure on the domestic economy.

The framework was first introduced in December 2015, with the announcement of the identification of AIB and Bank of Ireland as O-SIIs with a buffer rate of 1.5 per cent to be phased-in between July 2019 and July 2021. 

The Central Bank is responsible for identifying O-SIIs for Ireland and setting buffer rates.  As a member of the Single Supervisory Mechanism (SSM) buffer rates will also be implemented in conjunction with the European Central Bank (ECB). 

The list of O-SIIs and the associated buffer rates must be reviewed on an annual basis. This announcement is the outcome of the first annual review process.

Seven institutions are identified as systemically important in Ireland as a result of the 2016 review. The buffer rates and phase-in period for AIB and Bank of Ireland remains unchanged.  The buffer rates for the additional institutions are outlined in the table below. Phase-in periods apply for some banks depending on the size of the buffer applied.

This decision was taken at the Macroprudential Measures Committee on 5 September 2016. Identification of O-SIIs followed the European Banking Authority guidelines. The systemic importance of each institution was assessed and consideration was given to features of each bank’s business model which might influence its importance to the domestic economy. The applicable buffers were calibrated based on this assessment.

Notes to editors

• The Central Bank has been designated under S.I. 158 of 2014 as the national authority responsible for O-SII identification and associated buffer rate settings.
• As a member of the Single Supervisory Mechanism (SSM) these decisions are also made in conjunction with the European Central Bank (ECB) and are without prejudice to any powers of the ECB under the SSM Regulations2 with respect to O-SII buffer rate setting.
• O-SII identifications and rate decisions were first announced in 2015 and this announcement is the outcome of the annual review.
• More information on the Macroprudential Measures Committee is available here
• The Central Bank is the designated national macroprudential authority in Ireland.  In recent times, several macroprudential measures have been activated via the banking system. These include: borrower-based measures such as mortgage rules; the counter-cyclical capital buffer (CCyB); other systemically important institution (O-SII) buffer; and reciprocation of macroprudential policy measures taken by other Member States.