of businesses, the pandemic has been a period of sustained loss - making and a build - up of liabilities to a range of creditors including the revenue commissioners, landlords, suppliers, and to banks. our focus in this area is on both the conduct and strategy of banks and other lenders we supervise, as well as on informing the public debate with evidence - based research. secondly, we remain focused, as always, on questions of the supply of and demand for new loans. as a member of the eurosystem, the way in which lenders transmit monetary policy to the real economy is an ever - present topic of focus for us. similarly, an understanding of banks ’ capacity and willingness to lend is critical to our implementation of macroprudential policy. the work presented by niall today shows the underlying trends of the last decade have not been interrupted by the pandemic. essentially this work shows a reasonable supply of credit from the local financial system in combination with comparatively weak demand for new loans. one big question for the coming months and years is whether credit demand has been artificially suppressed for two years by the unprecedented provision of direct grant and wage subsidy support of the government. if this proves to be the case, one may expect a pick - up in demand for bank loans upon the removal of those supports. we will be closely monitoring these issues. moving now to the topic of investment, both the esri and eib papers provide a wealth of insight. we have learned today that, as you might expect during a period of such unprecedented uncertainty, both the share of businesses investing and, in particular, the monetary value of investments fell substantially in 2020. the esri study also highlights that a pocket of smes are not happy with their current capacity levels. this group agree or strongly agree that access to finance is a barrier to expansion. these findings tell us that, regardless of our views on the aggregate trends, there remains a perception among a sizable group of smes that the provision of external financing could be improved in ireland. in addition, it shows that inadequate provision of financing may be holding back investment to some extent. 1 one must always caution in such surveys that the demands of entrepreneurs may deviate very reasonably from the views that a lender or, indeed, a policymaker may have around an appropriate level of financing to the private sector. nonetheless, these findings should encourage us not to be complacent on matters of credit supply. finally, the eib

##ity risk management, valuation practices, dealing with procyclicality issues and with systemically important banks. it also encompasses resolution mechanism, compensation practices, stress the turner review ( 2009 ) – a regulatory response to the global banking crisis. bis central bankers ’ speeches testing, disclosures to enhance transparency and moving otc derivatives to central clearing and settlement mechanisms for reducing the systemic risk in derivative markets. iii. systemic risk – the elephant in the room measuring and analyzing systemic risk is at the core of ensuring financial stability. it is, therefore, important to understand what systemic risk is. while there is no single universally accepted definition of systemic risk, it is now commonly accepted that these are risks which affect large chunks of the financial system and which have the potential to adversely impact the real economy. a comprehensive definition of risk as defined by the imf, fsb and bis is “ a risk of disruption to financial services that is caused by an impairment of all or parts of the financial system and has the potential to have serious negative consequences for the real economy. ” there is also a broad agreement that there are two facets to systemic risk. in its first dimension, systemic risk evolves over time. this time dimension of systemic risk is also called procyclicality and it deals with the buildup of risks through financing imbalances. the imbalances i. e. high leverage, rapid credit growth and compressed risk premia build up during the expansionary phase of a business cycle due to the inherent procyclicality of the financial system and through the risk taking channel. these imbalances interact with macro economy amplifying the booms and busts. larger booms lead to larger busts and larger damage to macro economy. the second dimension, interconnectedness, relates to systemic risks being distributed across the financial system at any given point in time. these risks relate to common exposures, entangled balance sheets, common business models or profiles and interconnectedness amongst financial institutions. the set of policies which deal with managing the systemic risk is known as macro prudential policy. macro prudential policy tools are essentially micro prudential tools i. e. capital provisioning, loan - to - value ratios, debt to income ratios, etc. which are applied both at the institution level as well as at the system level as an overlay to micro prudential requirements in a countercyclical way. these tools are used to limit systemic risk