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Arthur Beesley in Dublin
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The Irish central bank ordered the country's commercial banks to increase their capital reserves to guard against any shock when the economy was in full swing.
In a statement released Thursday, the central bank said lenders would be required to hold an additional equity buffer equivalent to 1% of their Irish weighted exposures. The countercyclical capital reserve (CCyB), revised quarterly, has been set at zero since its introduction in 2015.
The bond will come into effect in July 2019.
Philip Lane, Governor of the Bank Central, said: The open economy is vulnerable to a range of external risks. The CCYB is an important tool to support a more stable financial system and less subject to cycles of expansion and recession.
The Irish government is forecasting GDP growth of 5.6% this year. 4% in 2019, but the country's open economy remains highly exposed to the risks of a messy Brexit and global trade tensions.
The intervention of the central bank comes after the IMF and the OECD have expressed concern over conditions in the country's booming real estate market.
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