View source for Finance:Central Bank of Ireland

{{Short description|Central Bank of Ireland}}
{{Infobox Central bank
|bank_name_in_local     = Banc Ceannais na hÉireann
|logo                   = Central Bank of Ireland logo.svg
|image                  = THE CENTRAL BANK OF IRELAND (NEW HEADQUARTER BUILDING ON NORTH WALL QUAY)- ALONG BOTANIC AVENUE (JANUARY 2018)-135336 (27856978779).jpg
|ownership              = 100% [[Social:State ownership|state ownership]]<ref name="dnbinfo">{{cite thesis|last=Weidner|first=Jan|year=2017|title=The Organisation and Structure of Central Banks|publisher=[[Organization:Technische Universität Darmstadt|Technische Universität Darmstadt]]|url=https://d-nb.info/1138787981/34}}</ref>
|reserves               = 740 million USD<ref name="dnbinfo"/>
|established            = {{start date and age|df=yes|1943|2|1}}
|headquarters           = {{ublist|New Wapping Street|North Wall Quay|[[Place:Dublin|Dublin]]||Ireland}}
|president              = Gabriel Makhlouf (since September 2019)
|leader_title           = Governor
|bank_of                = Ireland
<!--DO NOT add info on currency, rates, printer or mints, as these are controlled by ECB (the infobox is referring to the Central Bank part, which has released full control to ECB -->
|website                = {{URL|centralbank.ie}}
|preceded               = Currency Commission <small>(currency control)</small><br />[[Company:Bank of Ireland|Bank of Ireland]] <small>(Government's banker)</small><sup>1</sup>
|succeeded =
|footnotes              = <sup>1</sup> Even after establishment of the Central Bank, the [[Company:Bank of Ireland|Bank of Ireland]] remained the government's banker until 1 January 1972.<br /><sup>2</sup> The Central Bank of Ireland still exists but many functions have been taken over by the ECB.
}}
The '''Central Bank of Ireland''' ({{lang-ga|Banc Ceannais na hÉireann}}) is the Irish member of the Eurosystem and has been the monetary authority for the Republic of Ireland from 1943 to 1998, issuing the Irish pound. It is also the country's main [[Finance:Financial regulatory authority|financial regulatory authority]], and since 2014 has been Ireland's national competent authority within European Banking Supervision.<ref>{{cite journal |website=ECB Banking Supervision |url=https://www.bankingsupervision.europa.eu/organisation/nationalsupervisors/html/index.en.html |title=National supervisors|date=29 December 2022 }}</ref>

The Central Bank of Ireland was founded on 1 February 1943, and since 1 January 1972 has been the banker of the Government of Ireland in accordance with the Central Bank Act 1971,<ref>{{cite web|url=http://www.irishstatutebook.ie/1971/en/act/pub/0024/index.html |title=Central Bank Act, 1971 |publisher=Irishstatutebook.ie |date=28 July 1971 |access-date=21 April 2012}}</ref> which can be seen in legislative terms as completing the long transition from a [[Finance:Currency board|currency board]] to a fully functional central bank.<ref>Previously the commercial [[Company:Bank of Ireland|Bank of Ireland]], established in 1783, had been the government's banker.</ref>

Its head office, the Central Bank of Ireland building, was located on Dame Street, Dublin from 1979 until 2017.<ref>{{cite web|url=http://two.archiseek.com/2010/1980-central-bank-of-ireland-dame-street-dublin/ |title=1980 – Central Bank of Ireland, Dame Street, Dublin |publisher=Archiseek |access-date=10 April 2010 |archive-url = https://web.archive.org/web/20101201191719/http://two.archiseek.com/2010/1980-central-bank-of-ireland-dame-street-dublin/|archive-date=1 December 2010 |url-status=dead}}</ref> Its offices at Iveagh Court and College Green also closed down at the same time. Since March 2017, its headquarters are located on North Wall Quay, where the public may exchange non-current Irish coinage and currency (both pre- and post-decimalization) for Euros, as well as high value Euro banknotes and "mutilated" currency.<ref>{{cite web|url=https://www.centralbank.ie/contact-us |title=Central Bank of Ireland, Contact Us |publisher=Central Bank of Ireland |access-date=10 April 2017}}</ref> It also operates from premises at nearby Spencer Dock. The Currency Centre (Irish Mint) at Sandyford is the currency manufacture, warehouse and distribution site of the bank.<ref>{{cite web|url=http://www.centralbanking.com/central-banking/news/2480395/irish-central-bank-sells-old-premises-for-eur67-million|title=Irish central bank sells old premises for €67 million|date=17 January 2017|website=centralbanking.com|publisher=Central Banking Newsdesk|language=en|access-date=18 January 2017}}</ref>

==History==

===From Currency Commission to Central Bank (1920–1942)===

On the independence of the Irish Free State in 1922, the new state's trade was overwhelmingly with the United Kingdom (98% of Irish exports and 80% of imports in 1924),{{citation needed|reason=Data needs to be substantiated|date=April 2016}} so the introduction of an independent currency was a low priority. British banknotes (British Treasury notes, Bank of England notes), and notes issued by Irish trading banks circulated (but only the first were [[Finance:Legal tender|legal tender]]) and British coins remained in circulation.

Under the terms of the ''Coinage Act 1926'', the Finance Minister was authorised to issue coins of silver, nickel, and bronze of the same denominations as the British coins already in circulation – however, the Irish silver coins were to contain 75% silver as compared to the 50% silver coins issued by Britain at the time. These coins entered circulation on 12 December 1928.

Under the terms of the ''Currency Act 1927'', a new unit of currency, the ''Saorstát Pound'' ''(Free State Pound)'' was created, which was to be maintained at parity with the British Pound Sterling by a Currency Commission which would keep British government securities, Pounds Sterling cash, and gold to keep a 1–1 relationship.

From 1928 to 1979, the UK and Ireland were in a {{lang|la|de facto}} [[Finance:Currency union|currency union]].

===Foundation of the Central Bank to decimalization (1942–1971) ===

The ''Central Bank Act 1942'' which came into effect on 1 February 1943 renamed the Currency Commission the ''Central Bank of Ireland'', although the organisation did not at that time acquire many of the characteristics of a central bank:

* it was not given custody of the cash reserves of the commercial banks
* it had no statutory power to restrict credit, though it could promote it
* the [[Company:Bank of Ireland|Bank of Ireland]] remained the government's banker
* the conditions for influencing credit through open-market operations did not yet exist
* Ireland's external monetary reserves were largely held as external assets of the commercial banks

The mid-1960s saw the Bank take over the normal day-to-day operations of exchange control from the Department of Finance.  The Central Bank broadened its activities over the decades, but it remained in effect a currency board until the 1970s. Economist Patrick Honohan evaluates the success of the movement from a currency board to the central bank as follows: 'in contrast to many other post-colonial cases, (the currency board's) demise was not followed by a rapid depreciation and slide into semi-permanent high inflation and lack of convertibility.<ref>{{cite book|last1=Honohan|first1=Patrick|title=Currency Board or Central Bank: Lessons from the Irish pound's link with Sterling 1928–79|date=1994|publisher=Centre for Economic Policy Research|location=London|page=2|url=http://homepage.eircom.net/~phonohan/BNL.pdf}}</ref>

Such was the proliferation of small industrial banks and hire purchase firms in the late 1960s, the 1971 Central Bank Act introduced significantly enhanced authorisation and supervision standards. In the inevitable consolidation in the marketplace, in 1976 a liquidator was appointed to Irish Trust Bank Ltd after Central Bank investigations and in 1982 Merchant Banking Ltd also collapsed.

===Decimalization to European integration (1971–1978)===

{{see|Decimal Day}}

The 1970s was a decade of change, which began with the decimalisation of the currency which came into effect on 15 February 1971, when the decimal coinage was released into circulation (although 5p, 10p, and 50p coins were released a few years earlier, as they had exact equivalents in old currency units). Decimalisation would have provided an ideal opportunity to break the link with the Pound Sterling, but there was not much demand for this at that time. In 1972 however, the [[Finance:Bretton Woods system|Bretton Woods system]] of fixed exchange rates broke down, and in the wake of the 1973 oil crisis inflation in Britain increased dramatically, and economic theory would suggest that a smaller economy whose currency is pegged to a larger one will suffer the larger economy's inflation rate. At the same time moves to create a money market in [[Place:Dublin|Dublin]] and the transfer in 1968 of the commercial banks'  Pound Sterling assets to the Central Bank made it possible to contemplate a break in the link. In the mid to late 1970s, opinion within the bank was moving toward breaking the link with the Pound Sterling and devaluing the Irish currency in order to limit inflationary effects from abroad.

===The EMS and movement toward a single currency===

At this time, however, an alternative option became available. In April 1978, the European Council meeting in [[Place:Copenhagen|Copenhagen]] decided to create a "zone of monetary stability" in Europe, and European Economic Community institutions were invited to consider how to create such a zone. At the following Council meeting in Bremen, Germany in June 1978 the basic features of the European Monetary System were outlined, including the creation of the ECU – ''[[Finance:European Currency Unit|European Currency Unit]]'', a basket of the Community's currencies used to determine exchange rates, and the forerunner of the [[Finance:Euro|Euro]].

The Irish government had to decide whether or not to participate in the EMS. If the EMS had included all the European Economic Community's currencies, it would have provided stability for 75% of Ireland's external trade, but Britain, which still accounted for 50% of Ireland's external trade, decided to stay out of the EMS. Despite this, on 15 December 1978, it was announced that Ireland would participate in the EMS. Countries were given the option of either a 2.25% or 6% margin of fluctuation within the EMS' Exchange Rate Mechanism (ERM), and Ireland took the narrower margin. The EMS started on 13 March 1979, and towards the end of the month the Pound Sterling started to gain in value against the EMS currencies because of rising oil prices, and by 30 March the Pound Sterling breached the upper fluctuation band limit of the Belgian franc and the Irish currency could no longer track the Pound Sterling. After over 50 years, the parity of the Irish and British currencies was broken, and the Irish currency became known as the Irish pound (or Punt in the [[Social:Irish language|Irish language]]).

The initial experience of the EMS was disappointing. It had been expected that the Irish Pound would appreciate in value against the Pound Sterling, and hence reduce inflation in Ireland, but in practice, Sterling appreciated considerably in value thanks to its status as a [[Finance:Petrocurrency|petrocurrency]] and to the tight monetary policies of the new British government of Margaret Thatcher. By late 1980 the Irish Pound had fallen in value to less than 80 British pence, and Irish inflation was higher than British. Economic policy in Ireland was inconsistent with a "hard currency" policy, and the Irish Pound also failed to hold its value against the central rate of the Deutschmark, although it did appreciate in value against some of the other EMS currencies.

Eventually, the EMS settled down (notwithstanding a crisis in 1992 when the Irish Pound was devalued by 10%), and Irish inflation was the same or lower than Britain's inflation rate from 1987 onwards.

===Towards the Euro===

The idea of a single European currency goes back to the Schumann Plan of 1950. The first blueprint for how to go about implementing the currency, the Werner Report of 1970 was not proceeded with, but the ultimate aim was always kept in mind. The ''Delors Report'' endorsed by the Madrid Summit of June 1989 envisaged a three-stage process to monetary union, and this was given legal authority by the [[Finance:Maastricht Treaty|Maastricht Treaty]] of 1992 (enacted into Irish law as the Eleventh Amendment to the Constitution of Ireland by 70% of those voting in a referendum on 18 June 1992). This envisaged the start of monetary union on 1 January 1999 and the introduction of notes and coins on 1 January 2002.

The Central Bank began production of euro coins in September 1999 in the Currency Centre (Irish Mint) in Sandyford, producing over a billion coins, weighing about 5,000 tons, with a value of €230&nbsp;million before the introduction into circulation of the euro coins in January 2002. Production of euro banknotes began in June 2000, with 300&nbsp;million notes worth €4&nbsp;billion being produced in denominations of 5, 10, 20, 50, and 100 euros. Euro banknotes produced for the Central Bank are identified by having the serial number beginning with the letter T. The Bank did not initially issue €200 or €500 notes but has since begun to do so.<ref>{{cite news |url=http://www.rte.ie/news/2002/0111/euro.html|title=More euro in circulation than Irish pounds|access-date=1 May 2007|date=11 January 2002|publisher=RTÉ News}}</ref>

===Domestic banking crisis===
[[File:Ireland bond prices.webp|thumb|335px|Ireland bond prices, [[Inverted yield curve]] in 2011<ref>[https://www.researchgate.net/figure/a-Irish-yield-curve-dynamics-around-2011-loan-amendments-b-Portuguese-yield-curve_fig2_342609297 Figure 3. Irish yield curve]</ref>
{{legend-line|#FF8200 solid 3px|15 year bond}}
{{legend-line|#009A44 solid 3px|10 year bond}}
{{legend-line|#88FA4E solid 3px|5 year bond}}
{{legend-line|#970E53 solid 3px|3 year bond}}
]]
{{main|Finance:Post-2008 Irish banking crisis}}

The Central Bank noted in November 2005 that an overvaluation existed of 40% to 60% in the Irish residential property market. Minutes of a meeting with the [[Organization:OECD|OECD]] indicated that while the Central Bank agreed that Irish property was overvalued it was fearful of precipitating a crash by "putting a number on it". Senior Allied Irish Bank officials expressed concerns in 2006 that Central Bank stress tests were "not stressful enough".<ref>{{cite news|url=http://www.irishexaminer.com/world/mhkfcwkfojsn/rss2/|title=Bank officials in 2006 said stress tests were not stressful enough |publisher= Irish Examiner |date= 12 February 2015}}</ref> The  management ignored warnings from its own financial stability unit, according to one former staff member, whose evidence to the parliamentary inquiry was questioned by a number of other staff members,<ref>{{cite news|url=https://www.irishtimes.com/news/politics/central-bank-aware-of-property-bubble-from-2004-ex-employee-1.2362131 |title= Central Bank aware of property bubble from 2004 – ex-employee |newspaper= The Irish Times |date= 23 September 2015}}</ref> and from the [[Organization:Economic and Social Research Institute|Economic and Social Research Institute]] about the scale of bank loans to property speculators and developers<ref>{{cite news|url=http://www.breakingnews.ie/ireland/central-bank-ignored-my-warnings-before-economic-crash-esris-fitzgerald-661843.html|title=Central Bank 'ignored my warnings' before economic crash – ESRI's FitzGerald |work=Breaking News.ie|date=11 February 2015}}</ref> leading to key information being suppressed. It was reported that it sought to gag a prominent economist from talking about the fragile state of the nation's banks in relation the Irish branch of Northern Rock.<ref>{{cite news|url=http://www.businesspost.ie/claim-that-central-bank-sought-to-gag-economist-on-northern-rock/ |title= Claim that Central Bank sought to gag economist on Northern Rock |date= 11 October 2015 |work= The Sunday Business Post}}</ref> The Central Bank "watered down" economic warnings about the property bubble in the run-up to the crash, blocked internal communication reaching board level due to the political interests, and "rigorously" concealed data from the relevant external supervisors on the large exposures of Irish banks to individual developers.<ref>{{cite news|url=http://www.irishexaminer.com/ireland/central-bank-watered-down-warnings-of-propertybubble-336304.html|title=Central Bank 'watered down' warnings of property bubble|date=11 June 2015|work=The Irish Examiner}}</ref><ref>{{Cite web|url=https://inquiries.oireachtas.ie/banking/wp-content/uploads/2015/10/Frank-Browne-WSW.pdf|title=Joint Committee of Inquiry into the Banking Crisis. Witness Statement of Frank Browne|access-date=24 September 2020}}</ref>

In November 2007, they stated: "The Irish banking system continues to be well-placed to withstand adverse economic and sectoral developments in the short to medium term. The underlying fundamentals of the residential market continue to appear strong and the current trend in monthly price developments does not imply a sharp correction. The central scenario, therefore, is for a soft landing."<ref>Central Bank of Ireland- Financial Stability Report November 2007</ref>

After the bubble burst, Irish banks faced mounting losses which exposed them to a collapse of confidence following the Lehman Brothers bankruptcy in September 2008; they then suffered acute liquidity pressures which had to be met by Central Bank support, including emergency lending. Management abuses were also revealed at [[Company:Anglo Irish Bank|Anglo Irish Bank]], which had to be nationalised in January 2009.

The Central Bank annual report, published three months before the Irish State unconditionally guaranteed the deposits of Irish-owned banks, said: "The banks have negligible exposure to the sub-prime sector and they remain relatively healthy by the standard measures of capital, profitability and asset quality. This has been confirmed by the stress testing exercises we have carried out with the banks".<ref>{{cite news|url=http://www.independent.ie/business/irish/last-of-the-breed-1903360.html |title=John Hurley: Last of the breed |work=Irish Independent |date=3 October 2009 |access-date=11 April 2010}}</ref><ref>{{cite web|url=http://www.herald.ie/opinion/columnists/dan-white/id-rely-on-astrologer-fergus-more-than-central-bank-chief-1822588.html |title=I'd rely on astrologer Fergus more than Central Bank chief |first=Dan |last=White |work=Evening Herald |date=15 July 2009 |access-date=11 April 2010 |url-status=dead |archive-url=https://archive.today/20120904065633/http://www.herald.ie/opinion/columnists/dan-white/id-rely-on-astrologer-fergus-more-than-central-bank-chief-1822588.html |archive-date= 4 September 2012 }}</ref>

The next annual report had little to say about how and why the Irish banking system collapsed.<ref>{{cite news|url=http://www.independent.ie/opinion/columnists/brendan-keenan/fixing-the-government-is-now-more-important-than-fixing-our-banks-1835596.html |title=Fixing the Government is now more important than fixing our banks |first=Brendan |last=Keenan |work=Irish Independent |date=23 July 2009 |access-date=11 April 2010}}</ref> Although there were four Central Bank directors on the board of the Financial Regulator, the Central Bank maintained it had no powers to intervene in the market. Yet, the Central Bank had the power to issue directives to the Financial Regulator if it thought it was conducting its business in a way that was contrary to overall Central Bank policy aims. None were issued.<ref>{{cite web |last=Curran |first=Richard |url=http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=MARKETS-qqqm=nav-qqqid=43326-qqqx=1.asp |title=The inquisitor |publisher=Sunday Business Post |date=26 July 2009 |access-date=11 April 2010 }}{{dead link|date=January 2018 |bot=InternetArchiveBot |fix-attempted=yes }}</ref><ref>{{cite web|url=http://www.ft.com/cms/s/0/becb8b70-b917-11de-98ee-00144feab49a.html |title=Ahern admits to part in Irish crisis |work=Financial Times |date=15 October 2009 |access-date=11 April 2010}}</ref>

The regulator's processes and reports, and the findings of external scrutineers, any of which should have raised red flags, failed to do so. As a result, they did not see the enormity of the risks being taken by the banks and the calamity that was to overwhelm them.<ref>{{cite news|url= https://www.irishtimes.com/business/financial-services/admissions-about-lack-of-banking-experience-in-regulator-are-shocking-1.2246629|title=Admissions about lack of banking experience in regulator are shocking |newspaper= The Irish Times |date= 11 June 2015}}</ref>

The European Commission in a November 2010 review of the financial crisis said: "Some national supervisory authorities failed dramatically. We know that in Ireland there was almost no supervision of the large banks."<ref>{{cite news| url=http://www.economist.com/node/17420116?story_id=17420116 | newspaper=The Economist | title=Continental shift | date=4 November 2010}}</ref> Two months later, the President of the EU Commission in an angry exchange in the European Parliament, with a vehemence that shocked his audience, said that "the problems of Ireland were created by the irresponsible financial behaviour of some Irish institutions, and by the lack of supervision in the Irish market."<ref>{{cite news|url=http://www.independent.ie/business/irish/mad-as-hell-at-ireland-2506518.html |title=Mad as hell at Ireland|work=The Irish Independent |access-date=21 April 2012 |date=22 January 2011}}</ref>

==={{anchor|CBFSAI}}<!--Central Bank and Financial Services Authority of Ireland, Financial Services Authority of Ireland, and CBFSAI redirect here-->Separation of regulation – The Financial Regulator===


In 2003 a new separate division of the Central Bank, with its own chairman, chief executive, and board, was established as the Irish Financial Services Regulatory Authority. This was a compromise between those who favoured a fully independent regulator and those who believed the Central Bank should maintain full control of regulation of the financial services industry. This division of the Bank authorised and regulated all financial institutions (including insurance undertakings, collective investment funds and credit unions) in Ireland.<ref>{{cite web|url=http://www.financialregulator.ie/processes/authorisation/Pages/approach.aspx|title=Our Approach to Authorisation|archive-url=https://web.archive.org/web/20110110012244/http://www.financialregulator.ie/processes/authorisation/Pages/approach.aspx |archive-date=10 January 2011 }}</ref><ref>{{cite web|url=http://www.howbankingworks.ie/index.php?option=com_content&task=view&id=2&Itemid=25|title=How to start a bank in Ireland|archive-url=https://web.archive.org/web/20090604182921/http://www.howbankingworks.ie/index.php?option=com_content&task=view&id=2&Itemid=25 |archive-date=4 June 2009 }}</ref> The "Central Bank of Ireland" was formally renamed '''Central Bank and Financial Services Authority of Ireland''' ('''CBFSAI'''). (There was no entity named "Financial Services Authority of Ireland".)

Under the 2003 arrangements, the Central Bank provided the Financial Regulator with services. The Regulator's industry panel, which provided the Regulator with feedback on its charges and policies said in April 2007 that they had "major concerns with the quality and cost of the services" provided to the Regulator by the Central Bank.<ref>{{cite web|last=McBride |first=Louise |url=http://archives.tcm.ie/businesspost/2007/04/01/story22361.asp |title=Financial Regulator is questioned by own advisers |work=The Sunday Business Post |date=1 April 2007 |access-date=11 April 2010 }}{{dead link|date=June 2017 |bot=InternetArchiveBot |fix-attempted=yes }}</ref>

The operations of the Financial Regulator were severely criticised in a report marked "strictly confidential and not for publication", as being poor value for money.  The report stated that there were too few specialist staff, compared with its peers.<ref>{{cite news|url=http://www.independent.ie/business/irish/watchdog-blasted-in-its-own-confidential-report-1905928.html |title=Watchdog blasted in its own confidential report|work=The Irish Independent |access-date=21 April 2012 |date=7 October 2009}}</ref> There were also serious shortcomings in the crucial supervisory area.<ref>{{cite news |author=Brian O’Mahony |url=http://www.irishexaminer.com/business/report-exposes-financial-regulators-shortcomings-102825.html |title=Report exposes Financial Regulator's 'shortcomings' |work=Irish Examiner |date=8 October 2009 |access-date=21 April 2012}}</ref><ref>{{cite web|url=http://www.finfacts.ie/irishfinancenews/article_1018066.shtml |title=Wednesday Newspaper Review – Irish Business News and International Stories – – October 7, 2009 |publisher=Finfacts.ie |access-date=21 April 2012}}</ref> and the report was particularly critical of the regulator's senior management structure, concluding that a clear management and oversight framework, which ensures that issues are escalated through the organisation, was "not fully in place".<ref>{{cite news|url=https://www.irishtimes.com/newspaper/finance/2009/1014/1224256613610.html |title= Report critical of Financial Regulator |newspaper=The Irish Times |date=14 October 2009 |access-date=21 April 2012}}</ref>

Former Taoiseach Bertie Ahern, said that his decision in 2001 to create a new financial regulator was one of the main reasons for the collapse of the Irish banking sector and "if I had a chance again I wouldn't do it".<ref>{{cite web|last=Murray |first=John |url=http://www.ft.com/cms/s/0/becb8b70-b917-11de-98ee-00144feab49a.html?nclick_check=1 |title=Ahern admits to part in Irish crisis |work=Financial Times |date=15 October 2009 |access-date=21 April 2012}}</ref> Ahern said: "The banks were irresponsible. But the Central Bank and the Financial Regulator seemed happy. They were never into us saying – ever – 'Listen, we must put legislation and control on the banks'. That never happened."<ref>{{cite news|url=http://www.independent.ie/national-news/bertie-ahern-i-dont-consider-myself-a-romantic-person-mabye-that-was-the-problem-1891677.html |archive-url=https://archive.today/20120803162914/http://www.independent.ie/national-news/bertie-ahern-i-dont-consider-myself-a-romantic-person-mabye-that-was-the-problem-1891677.html |url-status=dead |archive-date= 3 August 2012 |title=Bertie Ahern: 'I don't consider myself a romantic person, maybe that was the problem' |work=The Irish Independent |access-date=21 April 2012 |date=20 September 2009 }}</ref>

In April 2010, the new Financial Regulator, outlined his shock at the poor level of [[Finance:Financial regulation|financial regulation]] he discovered when he started his job the previous January and "it is clear to me we need to undertake a fundamental overhaul of the regulatory model for financial services in Ireland."<ref>{{cite news|url=http://www.independent.ie/business/irish/watchdog-tells-of-shock-at-lax-levels-of-enforcement-2138635.html |title=Watchdog tells of shock at lax levels of enforcement – Irish, Business |work=The Irish Independent |access-date=21 April 2012 |date=15 April 2010}}</ref> He also said that there was a "critical absence of intellectual firepower within his staff".<ref>{{cite news|url=http://www.independent.ie/national-news/regulator-lacking-toplevel-graduates-2142595.html |title=Regulator lacking top-level graduates |work=The Irish Independent |access-date=21 April 2012 |date=18 April 2010}}</ref>

Following the banking collapse of 2008 and 2009, the Government<ref>{{cite web |url=http://www.finance.gov.ie/Viewtxt.asp?DocID=5839&StartDate=01+January+2009 |archive-url=https://web.archive.org/web/20110719084637/http://www.finance.gov.ie/Viewtxt.asp?DocID=5839&StartDate=01+January+2009 |url-status=dead |archive-date=19 July 2011 |title=Minister for Finance Brian Lenihan TD announces major reform of the institutional structures for regulation of financial services in Ireland |work=Press Releases |publisher=Department of Finance |date=18 June 2009 |access-date=11 April 2010 }}</ref> re-unified the organisation under a Central Bank of Ireland Commission to replace the board structures of the Central Bank and the Financial Services Regulatory Authority which became effective on 1 October 2010. The name "Central Bank of Ireland" was restored. A July 2009 editorial in the ''Sunday Business Post'' said "returning the key powers of regulation to the Central Bank will be useless unless there is a fundamental change in the culture of the organisation. This does not require a complete change of personnel, but a change of key personnel."<ref>[http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=EDITORIAL-qqqs=commentandanalysis-qqqid=42958-qqqx=1.asp]{{Dead link|date=June 2011}}</ref> There can be no denying that the spinning off of the Financial Regulator from the functions of the Central Bank in 2003, was an outright failure.<ref>{{cite news|url=http://www.independent.ie/business/move-to-rulesbased-system-will-need-a-change-in-culture-1779342.html|title=Move to rules-based system will need a change in culture |work=Independent.ie |access-date=21 April 2012}}</ref><ref>{{cite web|url=http://www.herald.ie/opinion/columnists/dan-white/id-rely-on-astrologer-fergus-more-than-central-bank-chief-1822588.html |title=I'd rely on astrologer Fergus more than Central Bank chief – Dan White, Columnists |publisher=Herald.ie |access-date=21 April 2012 |url-status=dead |archive-url=https://archive.today/20120904065633/http://www.herald.ie/opinion/columnists/dan-white/id-rely-on-astrologer-fergus-more-than-central-bank-chief-1822588.html |archive-date= 4 September 2012 }}</ref>

===Post crisis reforms===

On 4 November 2014 the European Central Bank formally took supervisory control over the biggest banks in Europe, including those in Ireland. While banking supervision staff in the Central Bank of Ireland remained, a pan-European approach to how banks were supervised was introduced, known as European Banking Supervision.<ref>{{cite web|url= http://www.thejournal.ie/irish-banks-new-regulator-1759313-Nov2014/ |title= Ireland's biggest banks are getting a new regulator today and here's how it's going to work|publisher=thejournal.ie |date=4 November 2014 }}</ref>

Subsequent to the parliamentary inquiry into the domestic banking crisis the organization said that the actions taken by the Central Bank combined with legislative reform and an overhaul of international regulation have enabled the organization to deliver effective supervision and financial stability measures since the crisis. Governor Philip Lane said, "The report describes a failure to identify risks to financial stability and recognizes the lack of an overall European framework to deal with the financial and fiscal crises. Many of the issues identified by the Inquiry relating to the Central Bank have been substantially addressed or continue to be addressed through measures including significant institutional reform, additional powers, the promotion of a culture of challenge and the implementation of the model of assertive risk-based supervision underpinned by a credible threat of enforcement."{{citation needed|date=December 2018}}

In early 2015 the Central Bank introduced macro-prudential mortgage regulations to increase the resilience of the banking and household sectors to the property market and to reduce the risk of bank credit and house price spirals from developing in the future.<ref name="The Irish Times"/> These measures are to be reviewed annually, with the first report published in November 2016.<ref>{{cite news|url=https://www.irishtimes.com/business/economy/central-bank-to-review-mortgage-rules-says-governor-1.2488855 |title=Central Bank to review mortgage rules, says governor |newspaper=The Irish Times |date=8 January 2016 |access-date=27 December 2018}}</ref>

In response to the July 2016 [[Finance:Leprechaun economics|leprechaun economics]] affair, on the request of the Central Statistics Office ("CSO"), the Governor of the Central Bank chaired a cross economic steering group (Economic Statistics Review Group, or "ESRG") including the [[Organization:Irish Fiscal Advisory Council|IFAC]], [[Organization:Economic and Social Research Institute|ESRI]], NTMA, leading academics and the Department of Finance, to recommend new economic statistics to the CSO, that would better represent the Irish economy (given the escalating distortions in GDP and GNP).<ref>{{cite web |url= http://www.cso.ie/en/media/csoie/newsevents/documents/reportoftheeconomicstatisticsreviewgroup/Economic_Statistics_Review_(ESRG)_Report_Dec_2016.pdf|title=REPORT OF THE ECONOMIC STATISTICS REVIEW GROUP|publisher=Central Statistics Office|date=December 2016}}</ref>  The result was the introduction of "[[Finance:Modified gross national income|modified GNI]]" (or GNI*). [http://www.cso.ie/en/csolatestnews/eventsconferencesseminars/resrg/ Report Site of the ESRG].<ref>{{cite web | url=http://www.cso.ie/en/media/csoie/newsevents/documents/reportoftheeconomicstatisticsreviewgroup/ESRG_Presentation_-_Press_Briefing.pdf|title=ESRG Presentation and CSO Response|publisher=Central Statistics Office|date=4 February 2017}}</ref><ref name="Leprechaun-proofing economic data"/>  2016 Modified GNI* is 70% of 2016 GDP (or 2016 GDP is 143% of 2016 GNI*).

===Historical archives and data===

The Central Bank opened its archives to the public in 2017 operating a 30 year rule for the release of records.<ref>{{cite web|url= https://centralbank.ie/news-media/press-releases/central-bank-of-ireland-opens-archives-for-public-research|title= Press Release - Central Bank of Ireland opens archives for public research|date=1 August 2017}}</ref> The archives can be accessed by means of the Banks online [[Social:Finding aid|finding aid]] and consulted in the Bank's North Wall Quay premises in Dublin.<ref>{{Cite web|url=http://archives.centralbank.ie/|title=Central Bank Archive &#124; Home page|website=archives.centralbank.ie|access-date=24 September 2020}}</ref>

The bank releases data on the changing wealth of Irish households.<ref>{{Cite news|url=https://www.irishtimes.com/business/economy/central-bank-says-average-net-wealth-surges-past-162-000-per-person-1.4165508|title=Central Bank says average net wealth surges past €162,000 per person|first=Mark|last=Paul|newspaper=The Irish Times|access-date=24 September 2020}}</ref>

==Responsibilities==

[[File:Central Bank of Ireland.JPG|thumb|260px|The former Central Bank of Ireland headquarters building on Dame Street, Dublin City.]]

The Central Bank of Ireland's mandate calls on it to contribute to the well-being of the people of Ireland and more widely in Europe by performing statutory responsibilities which cover a wide range, including :
* price stability;
* financial stability;
* consumer protection;
* supervision and enforcement;
* regulatory policy development;
* payment, settlement and currency systems operations and oversight;
* the provision of economic advice and financial statistics; and
* the recovery and resolution of distressed financial services firms.

==Governors==

[[File:Central Bank of Ireland.jpg|thumb|right|260px|The main entrance to the Central Bank of Ireland's former head office on Dame Street]]

The Governor of the Bank is appointed by the President of Ireland on the constitutional advice of the Government of Ireland.

{| class="wikitable" style="text-align:center"
|-
! Name<br/>{{small|(Birth–Death)}}
! Term of office
|-
| Joseph Brennan<br/>{{small|(1887–1963)}}
| 1943–1953
|-
| James J. McElligott<br/>{{small|(1890–1974)}}
| 1953–1960
|-
| Maurice Moynihan<br/>{{small|(1902–1999)}}
| 1960–1969
|-
| T. K. Whitaker<br/>{{small|(1916–2017)}}
| 1969–1976
|-
| Charles Henry Murray<br/>{{small|(1917–2008)}}
| 1976–1981
|-
| Tomás F. Ó Cofaigh<br/>{{small|(1921–2015)}}
| 1981–1987
|-
| Maurice F. Doyle<br/>{{small|(1932–2009)}}
| 1987–1994
|-
| Maurice O'Connell<ref>{{cite web|url=http://www.moyvane.com/m_o_connell.shtml |title=Maurice O'Connell: Present Governor of Ireland's Central Bank |publisher=Moyvane.com |date=1 January 2002 |access-date=11 April 2010 |url-status=dead |archive-url=https://web.archive.org/web/20100305035713/http://www.moyvane.com/m_o_connell.shtml |archive-date= 5 March 2010 }}</ref><br/>{{small|(1936–2019)}}
| 1994–2002
|-
| John Hurley<br/>{{small|(1945 – )}}
| 2002–2009
|-
| Patrick Honohan<br/>{{small|(1949 – )}}
| 2009–2015
|-
| [[Biography:Philip R. Lane|Philip R. Lane]]<br/>{{small|(1969 – )}}
| 2015–2019
|-
| Gabriel Makhlouf<br/>{{small|(1960 – )}}<ref>{{Cite news|url=https://www.irishtimes.com/business/economy/new-central-bank-governor-faces-bulging-in-tray-on-first-day-1.4005100|title=New Central Bank governor faces bulging in-tray on first day|last=Brennan|first=Joe|newspaper=The Irish Times|language=en|access-date=2019-09-02}}</ref>
|2019–Present
|}

==Criticisms==


[[File:Michael Noonan (crop).jpg|thumb|160px|right|In 2016, former Irish Finance Minister Michael Noonan, told an Irish MEP to "put on the green jersey" when told of a new Irish corporate BEPS tax tool to replace the prohibited “Double Irish" tool.<ref name="pearse">{{cite web|url=https://www.oireachtas.ie/en/debates/debate/dail/2017-11-23/18/|title=Dáil Éireann debate - Thursday, 23 Nov 2017|publisher=House of the Oireachtas|date=23 November 2017|quote=Pearse Doherty: It was interesting that when [MEP] Matt Carthy put that to the Minister's predecessor (Michael Noonan), his response was that this was very unpatriotic and he should wear the green jersey. That was the former Minister's response to the fact there is a major loophole, whether intentional or unintentional, in our tax code that has allowed large companies to continue to use the double Irish [called single malt].}}</ref>]]

Recurrent criticisms were made both before and after the Irish [[Finance:Post-2008 Irish banking crisis|banking crisis]], of the Central Bank of Ireland.<ref name="imf10">{{cite web|url=http://www.imf.org/en/Publications/Departmental-Papers-Policy-Papers/Issues/2016/12/31/Ireland-Lessons-from-Its-Recovery-from-the-Bank-Sovereign-Loop-43361|title=Ireland : Lessons from Its Recovery from the Bank-Sovereign Loop|publisher=IMF|date=23 October 2015}}</ref>  As seen in the Irish [[Finance:Post-2008 Irish banking crisis|banking crisis]], when global markets are stressed, several of these issues can occur simultaneously (i.e. they are not independent risks), to amplify the seriousness of the situation.  While the pre-crisis Central Bank of Ireland was judged to fail on all these criticisms,<ref name="imf10"/> the Irish State had the financial resources to [[Finance:Bailout|bail out]] the Irish banking system (Ireland was almost debt-free before the crisis).<ref name="ft.com">{{cite news|url=https://www.ft.com/content/51a2e9bf-f654-333c-8ae8-b5155eea9ea0 |archive-url=https://ghostarchive.org/archive/20221210/https://www.ft.com/content/51a2e9bf-f654-333c-8ae8-b5155eea9ea0 |archive-date=10 December 2022 |url-access=subscription |url-status=live|title=Irish government debt four times pre-crisis level, NTMA says|newspaper=Financial Times|date=10 July 2017|last1=Boland|first1=Vincent}}</ref><ref name="irishexaminer.com">{{cite web|url=https://www.irishexaminer.com/ireland/42-of-europes-banking-crisis-paid-by-ireland-219703.html|title=42% of Europe's banking crisis paid by Ireland|date=16 January 2013}}</ref>  Post the 2011–bailout, the Irish State has a debt-to-GNI* ratio of over 100%,<ref name="gni1">{{cite web|url=https://www.irishtimes.com/business/economy/cso-paints-a-very-different-picture-of-irish-economy-with-new-measure-1.3155462|title=CSO paints a very different picture of Irish economy with new measure|publisher=Irish Times|date=15 July 2017}}</ref><ref name="gni2">{{cite web|url=https://www.independent.ie/business/irish/new-economic-leprechaun-on-loose-as-rate-of-growth-plunges-35932663.html|title=New economic Leprechaun on loose as rate of growth plunges|publisher=Irish Independent|date=15 July 2017}}</ref> and will not be able to withstand such a material failing by the Central Bank of Ireland again. A recurrence would place the Irish banking system, and the Irish State, into creditor restructuring.

===Green jersey agenda===

In 2016, several Irish bank CEOs testified to being asked by senior officials of the Central Bank during 2007–2011 to follow a "green jersey agenda" in obfuscating the facts of Ireland's deteriorating banking system.<ref>{{cite web|url=https://courtsnewsireland.ie/irish-banks-pulling-green-jersey-financial-crisis-trial-told/2016/02/10/|title=Irish banks were "pulling on the green jersey" during financial crisis, trial told|publisher=Courts News Ireland|quote=A former Anglo Irish Bank director has told the trial of four senior bankers accused of conspiring to mislead investors that there was a “green jersey agenda” which involved banks working together to help each other out during the financial turmoil of 2008.|date=10 February 2016}}</ref><ref>{{cite web|url=https://www.reuters.com/article/us-ireland-banking-court-idUSKCN10912E?il=0|quote=Lawyers for the accused argued during the trial that their motivation in authorizing the deal was the “green jersey” agenda, the financial regulator’s request for Irish banks to support one another as the financial crisis worsened.|title=Ireland jails three top bankers over 2008 banking meltdown|publisher=Reuters|date=29 July 2016}}</ref><ref name="judge">Judge ruled that it would not be right or practical to try to stop the Jury hearing about the "green jersey agenda".{{cite news|url=https://www.irishtimes.com/business/financial-services/anglo-verdict-prosecution-wanted-green-jersey-agenda-removed-1.2678502?mode=sample&auth-failed=1&pw-origin=https%3A%2F%2Fwww.irishtimes.com%2Fbusiness%2Ffinancial-services%2Fanglo-verdict-prosecution-wanted-green-jersey-agenda-removed-1.2678502|title=Anglo verdict: Prosecution wanted 'green jersey' agenda removed|newspaper=The Irish Times|date=9 June 2016}}</ref><ref>{{cite news|url=https://www.irishtimes.com/opinion/the-green-jersey-merchants-haven-t-gone-away-1.2680177|quote=We heard a lot about the "green jersey" agenda during the Anglo trial, which finished during the week. It is the name given to the drive to protect the financial system as the crisis hit, taking in the government, Civil Service, regulators, banks and beyond.|title=The green jersey merchants haven't gone away|newspaper=The Irish Times|date=11 July 2016}}</ref> After the 2011–bailout by the EU–ECB–IMF (e.g. the [[Social:European troika|European troika]]) of the Irish banking system, a number of non–Irish senior executives were placed in the Central Bank of Ireland, including the Board of the Bank.  However, by 2017, almost all these non–Irish executives had departed the Central Bank, and some have publicised concerns about the Central Bank's tendency to push aside risk-management in pursuit of political and Government objectives.<ref>{{cite news|url=https://www.irishtimes.com/business/financial-services/former-regulator-says-irish-politicians-mindless-over-ifsc-russian-risks-1.3414779?mode=sample&auth-failed=1&pw-origin=https%3A%2F%2Fwww.irishtimes.com%2Fbusiness%2Ffinancial-services%2Fformer-regulator-says-irish-politicians-mindless-over-ifsc-russian-risks-1.3414779|title=Former Regulator says Irish politicians mindless of IFSC risks in "green jersey" agenda|newspaper=The Irish Times|date=5 March 2018}}</ref>

===Mortgage controls post crisis===

The Irish Celtic Tiger era was typified by large, interest-only mortgages, at high levels of loan-to-income values. After the 2011 bailout, the Central Bank introduced macro–prudential controls on mortgage lending both in terms of loan-to-value (a cap of 80% and 90% depending on circumstances), and loan-to-income (a cap of 3.5 times income).<ref name="The Irish Times">{{cite news|url=https://www.irishtimes.com/business/economy/what-will-the-new-central-bank-mortgage-regime-mean-to-you-1.2082519 |title= What will the new Central Bank mortgage regime mean to you? |newspaper= The Irish Times |date= 28 January 2015}}</ref> A limited number of exemptions to these are available to Irish banks for both of these rules on an annual basis. Additionally, the Irish Government introduced a Help To Buy scheme, which allows first-time buyers to receive 5% of the cost price of a house as an income tax rebate – which loosened the LTI requirements further for eligible first-time buyers.<ref>{{cite web|url=https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-15/15-01-46.pdf |title= Help to Buy (HTB) Part 15-04-46 Section 477C of the Taxes Consolidation Act (TCA) 1997 |publisher= Revenue Commission |date= 2017}}</ref> The Irish financial crisis showed the small and unusual nature of Ireland's economy (e.g. where a small number of U.S. corporates are [[Finance:Corporation tax in the Republic of Ireland#Low tax economy|80% of Irish tax, 25% of Irish labour, 25 of top 50 Irish firms, and 57% of Irish value-add]]), led to foreign banks rapidly withdrawing capital from Ireland in times of stress.

===Light-touch regulation===


In 2017, it was shown that brochures of [[Finance:International Financial Services Centre, Dublin|IFSC]] services firms market Ireland as a "light-touch" regulatory regime.<ref name="jim1">{{cite web|url=https://www.tasc.ie/download/pdf/seminar_on_section_110_12th_jan_2017.pdf|title='Section 110' Companies: A Success story for Ireland|publisher=Trinity College Dublin|author1=Professor Jim Stewart|author2=Cillian Doyle|date=12 January 2017}}</ref><ref name="jim2">{{cite web|url=https://www.tasc.ie/download/pdf/ireland_global_finance_and_the_russian_connection.pdf|title=Ireland, Global Finance and the Russian Connection|publisher=Professor Jim Stewart Cillian Doyle| date=27 February 2018}}</ref><ref name="rus2">{{cite web|url=https://www.businesspost.ie/news/russian-firms-funnelled-e100bn-dublin-410840|title=How Russian Firms Funnelled €100bn through Dublin|work=The Sunday Business Post|date=4 March 2018}}</ref><ref>{{cite news|url=https://www.irishtimes.com/business/media-and-marketing/more-than-100bn-in-russian-money-funnelled-though-dublin-1.3414480|title=More than €100bn in Russian Money funneled through Dublin|newspaper=The Irish Times|date=4 March 2018}}</ref><ref name="rus3">{{cite news|url=https://www.irishtimes.com/business/financial-services/a-third-of-ireland-s-shadow-banking-subject-to-little-or-no-oversight-1.3077931?mode=sample&auth-failed=1&pw-origin=https%3A%2F%2Fwww.irishtimes.com%2Fbusiness%2Ffinancial-services%2Fa-third-of-ireland-s-shadow-banking-subject-to-little-or-no-oversight-1.3077931|title=A third of Ireland's shadow banking subject to little or no oversight|newspaper=The Irish Times|date=10 May 2017}}</ref><ref>{{cite news|url=https://www.irishtimes.com/business/financial-services/ireland-is-world-s-fourth-largest-shadow-banking-hub-1.3077914?mode=sample&auth-failed=1&pw-origin=https%3A%2F%2Fwww.irishtimes.com%2Fbusiness%2Ffinancial-services%2Fireland-is-world-s-fourth-largest-shadow-banking-hub-1.3077914|title=Ireland is world's fourth-largest shadow banking hub|newspaper=The Irish Times|date=10 May 2017}}</ref><ref name="imf">{{cite news|url=https://www.irishtimes.com/business/financial-services/imf-queries-lawyers-and-bankers-on-hundreds-of-ifsc-boards-1.2811754|title=IMF queries lawyers and bankers on hundreds of IFSC boards|newspaper=The Irish Times|date=30 September 2016}}</ref> The Central Bank itself was paying rent to a US distressed debt-landlord who was using a Central Bank-regulated ICAV structure to avoid all Irish taxes.<ref>{{cite news|url=https://www.irishtimes.com/news/ireland/irish-news/central-bank-landlord-a-vulture-fund-paying-no-irish-tax-says-sf-1.2771263|title=Central Bank landlord a vulture fund paying no Irish tax, says SF|newspaper=The Irish Times|date=28 August 2016}}</ref> In February 2018, the Central Bank expanded the little-used L–QIAIF vehicle to give the tax benefits as Section 110 SPVs but without requiring public accounts for the Irish CRO, which was how the abuses above were uncovered.<ref>{{cite web|url= http://www.dilloneustace.com/uploads/files/L-QIAIF20CBI20Update202018.pdf|title=Central Bank of Ireland publishes notice of intention to amend the requirements for Loan Origination Qualifying Investor AIF|publisher=Dillon Eustace Law Firm|date=February 2018}}</ref>  In June 2018, the Central Bank reported that distressed debt funds switched €55 billion, or 25% of Irish [[Finance:Modified gross national income|GNI*]], out of Section 110 SPVs, and presumably into L–QIAIFs.<ref>{{cite news |url= https://www.irishtimes.com/business/economy/tax-free-funds-once-favoured-by-vultures-fall-55bn-1.3546101|title=Tax-free funds once favoured by 'vultures' fall €55bn: Regulator attributes decline to the decision of funds to exit their so-called 'section 110 status'|newspaper=The Irish Times|date=28 June 2018}}</ref>  Such actions have been highlighted as those of a "[[Finance:Ireland as a tax haven#Captured state|captured state]]" by tax-experts.<ref>{{cite web|url=http://treasureislands.org/the-capture-of-tax-haven-ireland-the-bankers-hedge-funds-got-virtually-everything-they-wanted/|title=The capture of tax haven Ireland: "the bankers, hedge funds got virtually everything they wanted"|publisher=Nicholas Shaxson|date=May 2013}}</ref><ref name="shaxson">{{cite web|url=https://www.taxjustice.net/2015/11/11/how-ireland-became-an-offshore-financial-centre/|title=How Ireland became a tax haven and offshore financial centre|publisher=Nicholas Shaxson, [[Organization:Tax Justice Network|Tax Justice Network]]|date=11 November 2015|quote=The willingness to brush dirt under the carpet to support the financial sector, and an equating of these policies with patriotism (sometimes known in Ireland as the Green Jersey agenda,) contributed to the remarkable regulatory laxity with massive impacts in other nations (as well as in Ireland itself) as global financial firms sought an escape from financial regulation in Dublin.}}</ref><ref>{{cite web|url=https://www.independent.ie/business/irish/nobody-believes-ireland-is-not-a-tax-haven-un-official-30988378.html|title='Nobody believes Ireland is not a tax haven' - UN official|quote="The Irish authorities knew exactly what was going on, long before the international community finally blew the whistle.|author=Professor Philip Alston|publisher=Irish Times|date=13 February 2015}}</ref>

===Distorted economic data===


[[File:Ireland Trade Good Discrepancy (1995-2017).png|thumb|260px|Apple's Q1 2015 Irish "quasi-inversion" of its $300 billion international IP is the largest recorded individual [[Finance:Base erosion and profit shifting|BEPS]] action in history, and almost double the 2016 blocked $160 billion Pfizer–Allergan Irish corporate inversion.<br />Brad Setser & Cole Frank<br />(Council on Foreign Relations)<ref name="cofr">{{cite web|url=https://www.cfr.org/blog/tax-avoidance-and-irish-balance-payments|title=Tax Avoidance and the Irish Balance of Payments|publisher=Council on Foreign Relations|date=25 April 2018}}</ref>]]

Research in June 2018 confirmed that Ireland, already a "[[Finance:Tax haven#Top 10 tax havens|major tax haven]]", was the world's largest tax haven.<ref name="gbz">{{cite web|url=http://gabriel-zucman.eu/missingprofits/|title=The Missing Profits of Nations|quote=Appendix Table 2: Tax Havens|page=31|author1=[[Biography:Gabriel Zucman|Gabriel Zucman]]|author2=Thomas Torslov|author3=Ludvig Wier|publisher=[[Organization:National Bureau of Economic Research|National Bureau of Economic Research]], Working Papers|date=June 2018}}</ref><ref name="zuc10">{{cite web|url=https://www.wsj.com/articles/corporations-push-profits-into-tax-havens-as-countries-struggle-in-pursuit-study-says-1528634659|title=Zucman:Corporations Push Profits Into Corporate Tax Havens as Countries Struggle in Pursuit, Gabrial Zucman Study Says|quote=Such profit shifting leads to a total annual revenue loss of $200 billion globally|publisher=Wall Street Journal|date=10 June 2018}}</ref><ref name="zux">{{cite web|url=https://www.irishtimes.com/business/economy/ireland-is-the-world-s-biggest-corporate-tax-haven-say-academics-1.3528401?mode=sample&auth-failed=1&pw-origin=https%3A%2F%2Fwww.irishtimes.com%2Fbusiness%2Feconomy%2Fireland-is-the-world-s-biggest-corporate-tax-haven-say-academics-1.3528401|title=Ireland is the world's biggest corporate 'tax haven', say academics|quote=New Gabriel Zucman study claims State shelters more multinational profits than the entire Caribbean|publisher=Irish Times|date=13 June 2018}}</ref>  In common with all tax havens, Ireland's economic data is distorted by the BEPS flows from tax management activities.<ref name="be">{{cite web|url=https://chicagounbound.uchicago.edu/cgi/viewcontent.cgi?article=2385&context=law_and_economics|title=What Do We Know About Base Erosion and Profit Shifting? A Review of the Empirical Literature|publisher=[[Organization:University of Chicago|University of Chicago]]|author=[[Biography:Dhammika Dharmapala|Dhammika Dharmapala]]|year=2014}}</ref><ref name="ber"/>  The top–10 GDP-per-capita countries, excluding natural resource countries, are all tax havens (see [[Finance:Tax haven#Inflated GDP-per-capita|GDP-per-capita and tax havens]]).<ref name="qqtz">{{cite web|url=https://qz.com/1300880/tax-havens-mean-40-of-foreign-direct-investments-are-artificial/|title=How tax havens turn economic statistics into nonsense|publisher=Quartz|date=11 June 2018}}</ref><ref name="imfx">{{cite web|url=http://www.imf.org/external/pubs/ft/fandd/2018/06/inside-the-world-of-global-tax-havens-and-offshore-banking/damgaard.htm|title=Piercing the Veil, FINANCE & DEVELOPMENT, JUNE 2018, VOL. 55, NO. 2 |publisher=IMF Finance & Development|date=June 2018}}</ref>  This was shown dramatically in July 2016 during "[[Finance:Leprechaun economics|leprechaun economics]]" affair when Apple re-structured its Double Irish BEPS tool, as agreed under an ongoing EU tax-investigation into Apple in Ireland, into a new Irish CAIA arrangement BEPS tool.

{{Blockquote|At this point, multinational profit shifting doesn't just distort Ireland's balance of payments; it constitutes Ireland’s balance of payments.|author=Brad Setser and Cole Frank, [[Organization:Council on Foreign Relations|Council on Foreign Relations]], "Tax Avoidance and the Irish Balance of Payments", 25 April 2018<ref name="cofr"/>}}

[[File:EUROSTAT Ireland Gross Operating Surplus by Controlling Country, €million 2015.png|thumb|260px|'''Dominance of U.S. companies''': Irish corporate ''Gross Operating Surplus'' (i.e. profits), by the controlling country of the company (note: a material part of the Irish figure is also from U.S. tax inversions who are U.S.–controlled). Eurostat (2015).<ref>{{cite web|url=http://economic-incentives.blogspot.com/2018/06/who-shifts-profits-to-ireland.html|title=Who shifts profits to Ireland|publisher=Economic Incentives, University College Cork|author=Seamus Coffey, Irish Fiscal Advisory Council|date=18 June 2018|quote=Eurostat’s structural business statistics give a range of measures of the business economy broken down by the controlling country of the enterprises.  Here is the Gross Operating Surplus generated in Ireland in 2015 for the countries with figures reported by Eurostat.}}</ref>]]

Exaggerated credit cycles are a documented feature of tax havens as global capital markets misprice the "headline" debt-to-GDP in benign times, only to reprice aggressively in less benign times, leading to a credit crisis (discussed in [[Finance:Corporate haven#Distorted GDP/GNP|tax haven credit cycles]]).<ref name="ber">{{cite web|url=https://www.socialeurope.eu/wp-content/uploads/2017/01/p_imk_wp_175_2017.pdf|author=Heike Joebges|title=CRISIS RECOVERY IN A COUNTRY WITH A HIGH PRESENCE OF FOREIGN-OWNED COMPANIES: The Case of Ireland |publisher=IMK Macroeconomic Policy Institute, Hans-Böckler-Stiftung|date=January 2017}}</ref>  In 2017, the Central Bank of Ireland responded to this issue, post-leprehaun economics, by introducing [[Finance:Modified gross national income|Modified gross national income]] (or GNI*), as a more appropriate measure for Ireland's economy.<ref>{{cite web |url=http://www.cso.ie/en/csolatestnews/eventsconferencesseminars/resrg/|title=Report of the Economic Statistics Review Group|publisher=Central Statistics Office|date=4 February 2017}}</ref><ref name="Leprechaun-proofing economic data">{{cite web|url=https://www.rte.ie/news/analysis-and-comment/2017/0204/850115-leprechaun-economics/|title=Leprechaun-proofing economic data|publisher=RTE News|date=4 February 2017}}</ref>

{{Blockquote|Ireland has, more or less, stopped using GDP to measure its own economy. And on current trends [because Irish GDP is distorting EU–28 aggregate data], the eurozone taken as a whole may need to consider something similar.|author=Brad Setser, [[Organization:Council on Foreign Relations|Council on Foreign Relations]], "Ireland exports its Leprechaun", 25 April 2018<ref>{{cite web|url=https://www.cfr.org/blog/ireland-exports-its-leprechaun|title=Ireland Exports its Leprechaun|publisher=Council on Foreign Relations|date=11 May 2018}}</ref>}}

The issues post-leprechaun economics, and "Modified GNI", are captured on page 34 of the OECD 2018 Ireland survey:<ref name="oecd">{{cite book|url=http://www.finance.gov.ie/wp-content/uploads/2018/03/OECD-survey.pdf|title=OECD Ireland Survey 2018|publisher=[[Organization:OECD|OECD]]|page=34|date=March 2018|isbn= 978-92-64-29177-5}}</ref>
{{ordered list|type=lower-roman
| On a Gross Public Debt-to-GDP basis, Ireland's 2015 figure at 78.8% is not of concern;
| On a Gross Public Debt-to-GNI* basis, Ireland's 2015 figure at 116.5% is more serious, but not alarming;
| On a Gross Public Debt-Per-Capita basis, Ireland's 2015 figure at over $62,686 per capita, exceeds every other OECD country, except Japan.<ref name="irip">{{cite web|url=https://www.independent.ie/irish-news/politics/national-debt-now-44000-per-head-35904197.html|title=National debt now €44000 per head|publisher=Irish Independent|date=7 July 2017}}</ref>
}}

===Commercial property bubbles===

[[File:Dublin Office sales price, as a multiple of cost of build, versus EU-28 (2016).jpg|thumb|right|260px|Comparison of the sales price as multiple of the cost of build, for a prime office in Dublin, with other eurozone countries (2016).]]

Ireland's status as a "[[Finance:Tax haven#Top 10 tax havens|major tax haven]]", and its exposure to a [[Finance:Corporation tax in the Republic of Ireland#Low tax economy|handful of major U.S. multinationals]], mean that its commercial property market is prone to overinflating.{{By whom|date=July 2019}} This effect is amplified because the Irish State enables foreign investors to pay no taxes on Irish commercial property via the Central Bank regulated [[Social:Qualifying investor alternative investment fund (QIAIF)|QIAIFs]] (and ICAVs in particular).<ref>{{cite news|url=https://www.independent.ie/business/commercial-property/tax-breaks-for-commercial-property-will-fuel-bubble-35189754.html| title=Tax breaks for commercial property will fuel bubble| quote=They'll do this by making commercial property investment, mainly by large foreign landlords, entirely tax-free. This will drive up commercial rents, suppress residential development, put Irish banks at risk, and deprive the State of much-needed funds.|work=Irish Independent|date=6 November 2016}}</ref><ref>{{cite web|url=http://stephendonnelly.ie/finance-bill-could-turn-commercial-property-bubble-into-next-crash/| title=Finance Bill Could Turn Commercial Property Bubble into next Crash| publisher=Stephen Donnelly T.D.|date=6 November 2016}}</ref> The ratio of the value of prime office in Dublin, to its cost-of-build, is the second-largest in the Eurozone, and only exceeded by Paris.<ref>{{cite web |url=https://www.indymedia.ie/article/106017|title=The commercial property bubble|work=Indymedia|date=24 November 2016}}</ref><ref>{{cite web|url=http://stephendonnelly.ie/tax-breaks-for-commercial-property-will-fuel-bubble/|title=Commercial office bubble rising|publisher=Stephen Donnelly|date= November 2016}}</ref> Irish office rents are close to London City office rents.<ref>{{cite news |url=https://www.independent.ie/business/commercial-property/tax-breaks-for-commercial-property-will-fuel-bubble-35189754.html|title=Tax breaks for commercial property will fuel bubble|work=Irish Independent|date=6 November 2016}}</ref>

Irish banks are the main lending institutions to Irish commercial property, and thus most exposed to material price distortions. As was seen in the Irish [[Finance:Post-2008 Irish banking crisis|banking crisis]], when global conditions weaken and the demand for Irish office space falls, the drop in Irish commercial valuations is more extreme than other markets. When this occurs in-sync with a global repricing of Irish credit, from a realisation of the level of artificial distortion in Irish economic data, the effects are further amplified. This risk was highlighted in 2014 when the Central Bank consulted the [[Finance:European Systemic Risk Board|European Systemic Risk Board]] ("ESRB") after lobbying by IFSC tax-law firms to expand the L–QIAIF vehicle.<ref>{{cite web|url=https://docplayer.net/31887836-Loan-origination-qiaifs-central-bank-consults.html| title=Loan Origination QIAIFs-Central Bank Consults| quote=ESRB: Nonetheless, if not subject to adequate macro- and micro-prudential regulation, this activity could grow rapidly and introduce new sources of financial stability risk. It could also raise the financial system’s vulnerability to runs, contagion, excessive credit growth and pro-cyclicality.|publisher=Dillon Eustace Law Firm|date=14 July 2014}}</ref> While the Central Bank agreed with the ESRB in 2014, it changed its mind in 2018, and decided to materially expand the L–QIAIFs vehicle (see {{slink||Light-touch regulation}}).

[[File:Dublin Office sales price versus EU-28 (2016).jpg|thumb|260px|Comparison of the sales price of Dublin prime office with other EU–28 countries (2016)]]

The longer-term risks of Irish commercial property were further increased with the U.S. Tax Cuts and Jobs Act of 2017, which fundamentally reduces the attractiveness of Ireland to U.S. multinationals, and could see Ireland lose its status as the [[Finance:Double Irish arrangement#Effect of the Tax Cuts and Jobs Act (TCJA)|major U.S. corporate tax haven]].<ref name="hbr">{{cite journal|url=https://hbr.org/ideacast/2017/12/breaking-down-the-new-u-s-corporate-tax-law|title=Breaking Down the New U.S. Corporate Tax Law|journal=Harvard Business Review|author=[[Biography:Mihir A. Desai|Mihir A. Desai]]|date=26 December 2017|quote=So, if you think about a lot of technology companies that are housed in Ireland and have massive operations there, they’re not going to maybe need those in the same way, and those can be relocated back to the U.S.}}</ref>

===Control of total credit===


Irish {{slink||Distorted economic data}} and the tendency to commercial and residential property bubbles has led to periods when Ireland's economy was over-leveraged and reliant on foreign capital. The ability of foreign capital to use Ireland's [[Finance:Tax haven|tax haven]] tools ([[Finance:Corporate haven#IP-based BEPS tools|IP–based BEPS tools]], and [[Finance:Corporate haven#Debt-based BEPS tools|Debt–based BEPS tools]]) to avoid Irish taxes, attracts further non-domestic credit.  It has been shown that smaller countries with a high proportion of non–domestic capital are prone to severe credit cycles.<ref name="ber"/> To resolve this imbalance in the 2007–2012 Irish financial crisis, Irish private-sector debt was transferred to Irish public-sector debt.<ref name="ft.com"/><ref name="irishexaminer.com"/>  The result is that Ireland is now one of the EU–28's most leveraged countries on a private and public sector basis (when measured GNI or per-Capita measures, to limit the distortion by Irish GDP).<ref>{{cite news|url=https://www.irishtimes.com/business/economy/who-owes-more-money-the-irish-or-the-greeks-1.2236034|title=Who owes more money - the Irish or the Greeks?|newspaper=The Irish Times|date=4 June 2015}}</ref><ref>{{cite news|url=https://www.irishtimes.com/business/economy/why-do-the-irish-still-owe-more-than-the-greeks-1.3001026|title=Why do the Irish still owe more than the Greeks?|newspaper=The Irish Times|date=7 March 2017}}</ref><ref>{{cite news|url=https://www.independent.ie/business/personal-finance/latest-news/irelands-colossal-level-of-indebtedness-leaves-any-new-government-with-precious-little-room-for-manoeuvre-34633087.html|title=Ireland's colossal level of indebtedness leaves any new government with precious little room for manoeuvre|work=Irish Independent|date=16 April 2016}}</ref><ref name="debt1">{{cite news|url=https://www.independent.ie/irish-news/politics/national-debt-now-44000-per-head-35904197.html|title=Net National debt now €44000 per head, 2nd highest in the World|work=Irish Independent|date=7 July 2017}}</ref> This means that the Irish State will not be able to bail out its banking system again for a considerable time.

During the 2008–2012 global credit crisis, reports showed Ireland's combined public and private sector credit as being the highest in the OECD (some reports{{citation needed|date=December 2019}} added in IFSC SPV credit producing higher, but misleading, figures).  In this regard, the Central Bank now tracks private and public credit in Ireland in its quarterly bulletins.  Private credit is tracked on a credit-to-income ratio, while public sector credit is tracked on a debt-to-GNI* ratio.<ref>{{cite web|url=https://www.centralbank.ie/docs/default-source/statistics/data-and-analysis/financial-accounts/quarterly-financial-accounts-for-ireland-q2-2017.pdf?sfvrsn=4|title=Quarterly Statistical Release November 2017  | publisher=Central Bank of Ireland | date=November 2017}}</ref>  In addition, as part of the post-crisis reforms, the independent statutory body, the [[Organization:Irish Fiscal Advisory Council|Irish Fiscal Advisory Council]], also reports on Irish leverage (public and private) and its sustainability.<ref>{{cite web|url=http://www.fiscalcouncil.ie/wp-content/uploads/2017/07/Fiscal-Assessment-Report-June-2017-Presentation.pdf|title=Debt levels remain high following the crisis June FAR Slide 7 | publisher=Irish Fiscal Advisory Council | date=June 2017}}</ref><ref>{{cite web|url=http://www.fiscalcouncil.ie/wp-content/uploads/2017/06/Fiscal-Assessment-Report-June-2017-Final.pdf|title=Section 1.2.2 Recent Fiscal Context June FAR Page 14  | publisher=Irish Fiscal Advisory Council | date=June 2017}}</ref><ref>{{cite web|url=http://www.fiscalcouncil.ie/wp-content/uploads/2015/03/Website-AN5.pdf | title=Future Implications of the Debt Rule | publisher=Irish Fiscal Advisory Council | date=June 2014}}</ref>  It is still common to see other State bodies (e.g. NTMA and IDA Ireland) present the distorted, and misleading, Debt-to-GDP data in their reports.{{citation needed|date=December 2018}}

==See also==

* Banknotes of the Republic of Ireland
* Coins of Ireland
* Economy of the Republic of Ireland
* Irish pound
* Irish modified GNI (or GNI star)
* [[Organization:Irish Fiscal Advisory Council|Irish Fiscal Advisory Council]]
* [[Social:Put on the green jersey|Green Jersey Agenda]]
* [[Finance:Ireland as a tax haven|Ireland as a tax haven]]
* List of central banks

==References==

{{Reflist|30em}}

==External links==
* {{Twitter|centralbank_ie|Central Bank of Ireland}}

{{Banks of Ireland}}{{Economy of Ireland}}{{Central banks}}


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{{DEFAULTSORT:Central Bank And Financial Services Authority Of Ireland}}
[[Category:Primary dealers]]

{{Sourceattribution|Central Bank of Ireland}}