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Monetary and financial stability: the implications for prudential supervision

Author(s): Ed Sibley

Date published: May 2019

Speech held by Ed Sibley, Deputy Governor - Prudential Regulation, Central Bank of Ireland, at the 46th OeNB Economics Conference in cooperation with SUERF in Vienna, on 2 May 2019.

The theme of the conference ‘European Economic and Monetary Union: the first and the next 20 years’ gives us wide scope to share some of our thoughts. We have much to learn from the last twenty years.

If we look back to 2007, problems had started to crystallise and accelerated in 2008, particularly post Lehmans, as market participants retreated towards safe assets. This tendency was intensified by the complexity and lack of transparency in the financial system. In other words, due to the complexity of the market, participants could not establish with confidence which risks would end up with whom and how they might be exposed to the ultimate holder of certain types of risks. Consequently, the market moved away from many higher risks. This included Irish banks with their large property exposures. The move away from the higher risks due to concerns about solvency took the form of a withdrawal of short-term liquidity, leading to the failure of the Irish banks and many others.

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SUERF Policy Note, Issue No 73SUERF Policy Note, Issue No 73

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