Gabriel Makhlouf, Governor, Central Bank of Ireland, speaking at the Macroprudential Policy for Investment Funds conference in Dublin on Monday. Photograph: Shane O'Neill, Coalesce.
“In the face of financial vulnerabilities, cohorts of funds can amplify shocks to other parts of the financial system and the real economy,” Mr Makhlouf told a conference on Monday. “This amplification follows decisions taken by individual fund managers in response to shocks.” With Ireland already a popular home for investment funds, the regulator has already started to tighten up oversight of the industry more broadly. It has limited leverage levels for property funds as well as moving to boost the ability of so-called liability driven investment funds to withstand sharp movements in UK government bond prices in response to the fallout from then UK prime minister Liz Truss’s mini-budget almost two years ago.
Creating overarching regulations for investment funds will “a multiyear” endeavour, he warned, adding it is “vital” that oversight of the sector “keeps pace with its growing importance from a systemic risk perspective.” Already existing regulations may also need to “evolve in order to be better able to mitigate system risk” while the Central Bank could need to develop “new tools specifically aimed at reducing the systemic risks posed by cohorts of the funds sector.