bubble can lead a financial institution to lose market share and profitability. by contrast, suffering the consequences of a deep downturn in the company of others is, perhaps, less worrisome. after all, collective mistakes may be forgiven and forgotten quickly. macro prudential policy given the catastrophic costs of credit - fuelled housing bubbles, central banks and financial regulators across the world have introduced what is known as “ macro prudential policy. ” i think of that as policies – other than interest rates – that restrict the financial system ’ s ability to extend credit. one benefit of these tools is that they can be used in a focussed way, targeting only those types of lending that are considered particularly risky. macro - prudential policies for property lending fall into two broad categories. the first comprises measures that enhance bank resilience by using capital and liquidity regulations. the second comprises tools that affect the credit terms offered to borrowers. the latter measures are the focus of my speech today. as you know, the central bank introduced ltv and lti ratios in february this year. the ltv limit restricts the amount one can borrow as a proportion of the value of the property and the lti limit restricts the amount one can borrow as a multiple of one ’ s income. such limits have been common in asia, and more recently gained prominence in europe. for example, norway and sweden introduced limits on ltv ratios of 85 per cent for new residential mortgage lending, while in 2014 the uk introduced an lti cap of 4. 5 times new lending. since the beginning of this year the czech republic introduced recommendations on mortgage lending while estonia introduced an ltv limit of 85 per cent for new housing loans. looking beyond europe, both canada and new zealand have ltv caps in place. although this list is by no means exhaustive, it will give you an idea of the increasing importance being placed on macro prudential measures. you may ask why these rules are suddenly introduced. of course, the recent global financial crisis is one reason. but, historically, such rules were not needed because banks ’ lending practices were conservative. for instance, here in ireland, prior to the 1990s, finance for private house purchases was provided more or less exclusively by building societies, which required borrowers to save a deposit, typically around 20 per cent of the value of the property. mortgage lti ratios prior to the mid - 1990s were roughly 2, with lti ratios above 2.

aggregate income still means a loss of purchasing power for those at the bottom of the income distribution who can least afford it. and these inequality data are probably not as reliable as some of the other more familiar macroeconomic data. but on this evidence the irish record here seems better than in some of the adjusting countries in europe. here is an area where ireland is not at an extreme : there is scope for policy to have a lasting impact. a long - argued issue in the economics of growth and development is whether greater equality of income is causally associated with more or less development – this is a topic that has been receiving a welcome degree of renewed interest internationally. what is clear is that countries at equally high levels of average living standards can exhibit very different internal income inequalities, reflecting different approaches to economic policy. “ growth is still good for the poor ” is the self - explanatory title of a recent study by some of the leading experts in the field by which they mean that there is no systematic tendency for growth to worsen income inequality : economic growth is accompanied by growing inequality in some countries, and by growing equality in others. conversely, recent research lends some support to the attractive proposition that a reduction from high levels of inequality can help drive faster growth in average living standards ( cf. dollar et al., 2013 ; ostry et al., 2014 ). conclusion history shows us that, as a nation, ireland does have a significant room for policy choices which can have a lasting impact on the quality of economic development. while there are important preconditions – common across countries and substantially defined in the acquis of the european union – for successful national economic performance, economic policy is not simply a question of converging to a single normative standard. the european union embraces considerable variety of style within the acquis, and this variety enriches and strengthens europe. such choices are political ones : we need to be aware that they exist. we should also be aware of the speed with which the conditions of macroeconomic imbalance can change quickly in ireland, not least because of its exceptional openness. seemingly intractable imbalances have been corrected surprisingly quickly ; balanced conditions have suddenly slipped out of control. the policy message here is one of optimism that at least some elements of current conditions can be made to swing around more quickly than is often supposed ; and of vigilance that slippage does not occur again. bis central bankers ’ speeches