Central Bank's Makhlouf warns over huge risks from non-bank sector

The massive sector in Ireland that includes investment funds and special purpose entities

Gabriel Makhlouf: 'The financial stability risks are self-evident, as are the risks to investors, consumers and the community as a whole.'

Central Bank governor Gabriel Makhlouf has stepped up warnings about the risks to the financial system from the massive non-banking and investment funds industry.

There were elevated risks to the stability of the global system from the international investment funds industry, Mr Makhlouf told a banking industry conference.

He said regulators were focusing on how best to regulate so-called non-banks, a massive sector in Ireland that includes investment funds and special purpose entities.

However, the regulator needed better and coordinated action to assess the risk to financial stability, he said.

Mr Makhlouf said Ireland has a significant role to play because it hosts a €5.6 trillion funds sector that is the third largest internationally.

That means "the financial stability risks are self-evident, as are the risks to investors, consumers and the community as a whole", Mr Makhlouf said.

The Central Bank is one of a number of international regulators that is concerned about the potential for the next big shock to the global system.

"The Central Bank of Ireland is planning to introduce leverage limits for property funds connected to the domestic economy, but we cannot tackle the wider issue alone," he said, urging that "global and European coordination" was required.