Sharon Donnery, Deputy Governor of the Central Bank of Ireland, used a speech at Maynooth University this morning to set out the rationale for a countercyclical capital buffer for Irish banks. In an event organised by the Department of Economics, Finance and Accounting, Maynooth University, the Deputy Governor, who began her career lecturing in the Economics Department at Maynooth, noted that despite the very positive developments in the Irish economy in recent years, certain challenges remain as a legacy of the crisis, including the extent of long-term mortgage arrears and the relatively high level of private and public debt. In order to build resilience in the face of uncertainity, Sharon emphasised the importance of using the gains from strong cyclical dynamics to build up sufficient buffers to withstand the losses that will arise during a downturn. One proposed instrument available to the Central Bank is the Countercyclical Capital Buffer (CCyB). The buffer works by uncreasing the minimum capital requirement of banks when cyclical risks begin to build. During downturns the buffer are then released, by reducing minimum capital requiremetns in a sustainable way.
The Deputy Governor was joined on the day by an expert panel including Professor Gregory Conor (Maynooth University) and by Dr. Robert Kelly (Deputy Head of Financial Stability at Central Bank of Ireland) and Dermot O'Leary (Chief Economist at Goodbody Stockbrokers) who discussed a range of issues on he theme of macroprudential policy. Robert and Dermot are both graduates of the Economics and Finance programme at Maynooth University and it was a pleasure to welcome them back to Maynooth. Mitigating the systemic risks associated with economic downturns requires talented economists with the skills necessary to identify, measure and manage these risks. The Department of Economics, Finance and Accounting are delighted to be at the forefront when it comes to producing graduates with the required skills and we look forward to working closely with the Central Bank on these issues in the coming years.
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