Finance Minister Paschal Donohoe has approved a request from the Central Bank to activate a "systemic risk buffer" that would allow it to impose additional capital requirements on banks in the future to further protect the economy. 

Systemic risk buffers have been applied in some other EU economies. 

In May, the Central Bank said that, for Ireland, the aim of the buffer would be to add resilience against "tail risks".

These tail risks are economic shocks which are unlikely to occur but which would have a significant impact on the economy and financial system if they did. 

The then Central Bank Governor Philip Lane said the main such risk facing Ireland - apart from Brexit - is the country's high dependence on multinational firms.

Professor Lane said that if there were a persistent shock to that sector, the cumulative economic decline "would dwarf a normal cyclical recession". 

"Providing the Central Bank with the required power to impose the systemic risk buffer means that the bank will have the complete macroprudential toolkit at its disposal and this will enable the bank to adequately assess and take appropriate measures to address the systemic risks faced by Ireland's small highly globalised economy," Minister Donohoe said.

The systemic risk buffer (SyRB) is one of the four capital buffers provided for in the Central Bank's Capital Requirements Directive and forms part of the Macroprudential Toolkit. 

The other buffers are the capital conservation buffer, the global/other systemically important institution buffer and the counter cyclical capital buffer.