EU clears the way for Irish bank payouts to go ahead after financial market turmoil

“Definitely this is not something we are considering,” he said. “We have already reviewed the distribution plans of our banks. They have submitted to us their capital projections, also under adverse scenarios, and nothing has changed that affects our assessment of these capital plans.”

“During the pandemic we were in a totally different environment,” he added.

AIB and Bank of Ireland have together proposed to distribute more than €700m to shareholders in regular dividends and share buybacks this year.

Buybacks require approval from the ECB, whose supervisors must assess both the capital strength of individual banks and the overall economic and market context before deciding whether to permit payouts.

However, the recent failures of Silicon Valley Bank and Credit Suisse do not appear to have changed the ECB’s calculations, even though markets have been in turmoil with steep share price declines and big movements in bond yields.

The ECB ordered banks to halt capital distributions in 2020 as Covid-19 swept the globe and widespread lockdowns froze the European economy.

Mr Enria has said numerous times since then that the pandemic was a special case where the ECB had “no visibility whatsoever” on potential bank losses, unlike more quantifiable exposures such as the war in Ukraine or the impact of higher interest rates on bank balance sheets.

The Irish banks have been eager to return capital to investors following a profitable 2022 after years of poor returns. In the case of AIB, the State is in line to get just over €300m from dividends and a proposed directed buyback that would also cut the Government’s shareholding by 2pc-3pc.

Both banks are in talks with the ECB regarding buyback approval, while shareholders will be asked to sign off on dividends at upcoming annual general meetings.

Banking analysts have said that recent market volatility does not change the fundamental case for capital distributions from the Irish banks, although regulators might consider it “at the margins”.

An ECB spokesperson said “we expect distributions to be anchored to sound capital planning under credible baseline and severe bank-specific adverse scenarios. That is not new and that still applies.”

Mr Enria said banks should not be complacent about risks in the current environment.

“Increasing interest rates and quantitative tightening require banks to sharpen their focus on liquidity and funding risks,” he said. “There is a risk that banks might be caught off guard,” he warned.

Bank of Ireland shares rose 6.76pc yesterday while AIB was up 5.64pc.