* Impact of CRE market downturn is contained so far

* CRE valuations in Ireland fell 27% since 2019

* Central bank maintains 1.5% counter-cyclical capital buffer

DUBLIN, June 11 (Reuters) - Ireland's domestic banking system continues to have sufficient capacity to absorb, rather than amplify, a steep fall in commercial real estate valuations, the country's central bank said in a fresh assessment of the sector on Tuesday.

Similar to global commercial real estate (CRE) markets, prices in Ireland began falling in 2020 due to pandemic-related changes such as increased remote working. The decline has accelerated since the increase in global interest rates in 2022.

Irish CRE valuations have fallen by an estimated 27% since late 2019 and the central bank raised the possibility of further falls ahead, with the Dublin office market experiencing one of the largest increases in vacancy rates in Europe at 17%.

Risks appear particularly acute in the office market where rents may not yet have fully adjusted to post-pandemic working practices, the regulator added.

Irish banks, however, are far less exposed than 15 years ago when CRE lending represented over one-third of their loan books and helped push Ireland into an international bailout. That exposure has since fallen to around 10% and the central bank said underwriting criteria are also now more prudent.

It said that to date the banking system has absorbed the price shock in an orderly manner, with key bank risk metrics not yet pointing to a meaningful increase in borrower distress.

With the banking system expected to remain profitable, the central bank said capital buffers will not need to be used to absorb losses in the central case of a reverse stress test it conducted as part of the study.

It also said the shock did not warrant a change to the counter-cyclical capital buffer (CCyB) - the amount of capital banks must set aside as extra protection against future crises - which the central bank maintained at 1.5% in a biannual review.

The regulator did caution, however, that the potential for further CRE-related distress was a salient near-term risk for banks to manage and that there are vulnerabilities within the non-bank sector that it will closely monitor. (Reporting by Padraic Halpin in Dublin Editing by Matthew Lewis)