In 1979, Ireland joined the European Monetary System, thus severing the 150-year-old tie with the British pound. The Central Bank of Ireland, established in 1942, is both the monetary authority and the bank of issue. Its role quickly expanded considerably, particularly in monetary policy. Commercial deposits with the Central Bank have strongly increased since 1964, when legislation first permitted it to pay interest on deposits held for purposes other than settlement of clearing balances. Since July 1969, the Central Bank has accepted short-term deposits from various institutions, including commercial and merchant banks. With the advent of the European Monetary Union (EMU) in 1999, authority over monetary policy shifted to the European Central Bank.
The commercial banking sector is dominated by two main Irish-owned groups, the Bank of Ireland Group and the Allied Irish Banks Group. Successive governments have indicated that they would like to see a third banking force (possibly involving a strategic alliance with a foreign bank). Other major banks include the National Irish Bank, a member of the National Australia Bank, and Ulster Bank, a member of the National Westminster Bank Group. The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $21.1 billion. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $94.1 billion. The money market rate, the rate at which financial institutions lend to one another in the short term, was 3.31%.
A number of other commercial, merchant, and industrial banks also operate. Additionally, Ireland's post office operates the Post Office Savings Banks and Trustee Savings Banks. The Irish stock exchange has its trading floor in Dublin. All stockbrokers in Ireland are members of this exchange. The Irish Stock Exchange is small by international standards, with a total of 76 domestic companies listed at the end of 2001. Total market capitalization at the end of 2001 was (21.8 billion for the government securities market, making it one of the EU's smallest stock markets, however fast-growing.
The Stock Exchange Act came into effect on 4 December 1995, and separated the Dublin Stock Exchange from the London Stock Exchange. Since that date, the Dublin Stock Exchange has been regulated by the Central Bank of Ireland.