- based finance is the raising of equity or debt through the financial markets rather than through the banking system. the growth in market - based finance is a positive development. it provides a useful alternative to bank financing and can facilitate risk - sharing across the financial system. however, it is important that capital markets are resilient. we need capital markets that can provide the benefits of increasing flows of market - based finance to the economy in good times, but which also prove resilient in bad times. policymakers must ensure that the level of resilience in market - based finance is commensurate with its contribution to systemic risk and how it interacts with the financial system and the 1 / 3 bis central bankers'speeches economy as a whole. building resilience in market - based finance will ensure that the wider financial system is better placed to absorb, rather than amplify, financial shocks in times of stress. the response to the pandemic proved challenging for the market - based finance sector. as financial market turbulence increased, a broad - based ‘ flight to safety ’ and a heightened demand for cash swept through a range of markets. around the time a pandemic was declared by world health organisation ( w ho ) nearly a year ago, the funds sector experienced a sharp increase in redemptions. some of the most acute redemption pressures were seen in money market funds ( mmfs ) which are typically used by investors, such as non - financial corporates, for cash management purposes and are, in turn, active players in short - term funding markets. the march episode highlighted that money market instruments may not be as liquid in all circumstances as investors expect. and although all mmfs managed to meet redemption requests, had mmfs been forced to suspend redemptions, liquidity stresses could have spilled over to other parts of the financial system. the interconnectedness of mmfs with other parts of the financial system – including banks and other non - banks – means their resilience in periods of stress can be systemically important. overall, the market stresses experienced in march, together with the unprecedented scale and speed of central bank intervention required to manage those stresses, have brought to the fore previously identified structural vulnerabilities relating to some segments of the investment fund sector. this brings me to the key lesson : the need to develop and operationalise the macroprudential framework for market - based finance. the potential for collective action problems is the main rationale for a macroprude

, it was banks that primarily fuelled the property bubble. in short, there was too much bank lending, financed by heavy foreign borrowing ; this funded an unsustainable construction and property price boom. to expand credit on the scale which happened, banks leveraged their deposits with sizeable borrowings from abroad. funds were readily available in a global economy awash with surplus savings, with increasing possibilities for securitisation and helped by the absence of exchange rate risk on euro borrowings. without large - scale foreign borrowing by the banks, the property boom could not have grown as it did. irish banks also engaged in extensive lending to finance projects outside of ireland, though, in practice, this offered them little real diversification. such lending was once again largely focussed on property - related activities, quite often involved irish residents and tended to be concentrated on markets which were strongly correlated to ireland. consequently, overinvestment in property by irish people was not confined to this country ; the boom period also saw strong expansion in overseas property investment, particularly commercial property. much of this investment was concentrated on the uk. while comprehensive data on the scale of such flows ( lending for investment in uk property market ) is not published, industry estimates suggest that up to half of such commercial investment went to the uk and that, during this period, irish investors accounted for a not insignificant share of activity in the uk commercial property market. while the expansion of irish banks stands out for the scale on which these things occurred, it is clear that this experience was not unique. global financial conditions were characterised by an abundance of liquidity and very low risk aversion across most markets. ireland was not the only banking market which expanded by lending for property. a similar pattern was seen in the uk, where a similar combination of macroeconomic imbalances and financial sector developments, accompanied by a similar lowering of credit standards, drove rapid expansion of credit. to be sure, the british financial sector is much larger and more complex than that in ireland. nevertheless, a significant part of its expansion in the mid - 2000s was related to funding of the property market. it has also been argued that accounting standards designed to reflect observable facts and limit the role of judgement as to future possibilities and risks, further contributed to pro - cyclicality in credit provision and pricing. the increase in property prices in britain was not far behind that in ireland, though the construction boom was much less pronounced, limiting the scale of the subsequent over