Ireland’s central bank governor has called for stricter regulation of the country’s €5.6 trillion funds sector in order to safeguard financial stability.
Gabriel Makhlouf, governor of the Central Bank of Ireland (CBI), said more regulation was needed of the non-bank sector – including investment funds, money market funds and special purpose entities – and that global coordination was “urgently” needed.
The governor was speaking at the CBI’s first financial system conference in Dublin, in which he announced plans to limit leverage for property funds connected to the domestic economy.
“The lessons of the global financial crisis, the covid-induced market shock of March 2020, and the UK’s recent LDI issue are clear. The sector is too big to ignore,” the governor said.
“We cannot tackle the wider issue alone. Global and European coordination is needed here, and, I suggest, urgently”.
Ireland is home to the third largest funds sector in the world. Entities registered in Ireland grew by 66% to nearly 10,000, and assets under administration grew by 86% to €5.6 trillion between 2016 and 2021.
“The financial stability risks are self-evident, as are the risks to investors, consumers and the community as a whole,” Makhlouf said.
Underscoring the bank’s commitment to protecting investors’ interests through accelerated operations, he urged stakeholders to be agile, forward-looking and connected in their approach to maintaining a stable financial system.
According to Makhlouf, regulations — with positive outcomes and people’s welfare at their core — should follow six principles: forward-looking, connected, proportionate, predictable, transparent and agile.
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