Dáil Éireann Debate, Thursday - 14 February 2019
39. Deputy Thomas P. Broughan asked the Minister for Finance his plans to introduce legislation on regulations for the large shadow banking sector here; and if he will make a statement on the matter. [7156/19]
Amharc ar fhreagra"Shadow banking" is a term used to describe bank-like activities that take place outside the traditional banking sector. It is also commonly referred to internationally as non-bank financial intermediation or market-based finance.
According to the recently published Financial Stability Board’s Global Monitoring Report on Non-Bank Financial Intermediation 2018, as at the end of 2017 the assets of the non-bank financial intermediation sector operating in Ireland was estimated at €2.3 trillion. The shadow banking system, as defined by the Financial Stability Board (FSB) is composed of a number of sub-sectors and is made up mainly of investment funds, special purpose entities and credit derivative holdings.
I have been informed by the Central Bank of Ireland that the largest component of the Irish-domiciled shadow banking sector is collective investment vehicles (investment funds). Investment Funds are subject to an extensive set of EU body rules in the form of the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive and the Alternative Investment Fund Managers (AIFM) Directive. These are supplemented by domestic Irish requirements under Central Bank regulations and rules.
The Central Bank is an active participant on Ireland’s behalf in the international debate on shadow banking. This includes participating in the Financial Stability Board's global non-bank financial intermediation monitoring exercise and the international policy debate in IOSCO and the ESRB.
The Bank has also informed me that the global package of regulatory reforms since the crisis, including the relevant non-bank elements, has been an appropriate response to the vulnerabilities in the system that the crisis exposed.
These reforms include the Financial Stability Board's global monitoring framework to identify non-bank financial intermediation risks; addressing liquidity mismatches and the build-up of leverage in investment funds; reforms in the EU in relation to money market funds; the movement towards central clearing of derivative transactions and facilitating the standardisation of securitisation.
Finally, my officials will continue to monitor and participate in discussions on regulatory reform in the financial sector at the various groups and committee at EU level and advise me accordingly on developments. With the large amount of European regulatory frameworks that have come into place within the last number of years that has a significant part of the Irish non-bank financial intermediation within its scope, there are no plans currently to introduce specific domestic legislation on this issue at this point.
