The Central Bank has given banks here permission to use a capital buffer they are required to hold in order to support the continued provision of credit to households and businesses.
The Counter Cyclical Capital Buffer (CCyB) will be reduced from 1% to 0% by April 2.
The move is aimed at helping the economy, businesses and households through the economic shock that has been brought about by the Covid-19 pandemic.
The regulator had been coming under increased pressure to release the buffer, as banks unleash a raft of measures to support customers through financial difficulty.
"The rationale for building a positive CCyB rate early in the economic cycle is that the buffer is there to be released, when risks materialize," the Central Bank of Ireland said.
"The goal of the CCyB is to support the sustainable flow of credit to the economy, not just in good times, but also in bad."
"The release of the CCyB at this point in time is appropriate and will support the supply of credit to households and firms during the downturn."
The regulator added that it expects banks to use the positive effects of the measures "solely in support of the economy and not for dividend distributions."
Giving future guidance, the bank also said it does not intend to increase the capital buffer contribution before the first three months of next year at the earliest.
"The banking system has in recent years built up its capital and liquidity buffers, strengthening its resilience to adverse shocks," it said.
"This resilience is precisely for periods like these. The capital buffers are there to be used, to support the businesses, consumers and the wider economy in this difficult time."
Tomorrow the Central Bank will meet with the Banking & Payments Federation Ireland (BPFI) and the five main banks to discuss the issues.