sharon donnery : lessons from the past, safeguarding stability for the future address by ms sharon donnery, deputy governor of the central bank of ireland, at the centre for economic policy research ( cepr ) economic history symposium, dublin, 9 june 2016. * * * i would like to thank mark cassidy, yvonne mccarthy, micheal o ’ keeffe and rebecca stuart for their contributions to this speech. introduction good morning. on behalf of the central bank of ireland, i am delighted to welcome you to the fourth centre for economic policy research economic history symposium. the conference has a fascinating and varied programme and the central bank of ireland welcomes the chance to be involved. unfortunately the governor is unable to be here and sends his best wishes. both economic history and the history of economic thought provide valuable lessons for policymakers today, not least central bankers in our quest to safeguard price and financial stability. and yet, despite the numerous experiences of financial crises over the past two centuries, recent events highlighted starkly the lack of both analytical frameworks to assess the risks associated with the build - up of financial imbalances, and the policy tools to mitigate them. for my introductory remarks, i would like to reflect briefly on the recent actions taken by the central bank to contribute to financial stability in ireland through the introduction of macroprudential policies. lessons from the past the term “ macroprudential ” only surfaced in public documents in the mid - 1980s. 1 however, throughout much of the twentieth century, and particularly during the post - war period, there were numerous examples of central bank interventions in the financial system that can, in retrospect, be considered “ macroprudential ”. during this time, many central banks in europe, and the us, used quantitative controls rather than interest rates to steer the economy and maintain bank stability. measures such as credit controls, reserve ratios and liquidity ratios were used in europe, and loan - to - value and repayment caps in the us. 2 such measures were largely implemented at a time when the boundaries between fiscal, monetary, industrial and prudential policies were less clearly defined. financial market deregulation and increasing central bank independence led to the clearer delineation of these policy functions. at the same time, the rise of inflation targeting meant central banks used these non - interest rate policies less and less. in ireland, credit, capital, and interest rate controls were progressively dismantled from the 1980s. 3 see galati

. 5 times gross income. this acts as a restraint on excessive repayment burdens and unsustainable increases in household debt. recognising the difficult situation first - time buyers can face in entering the market ( and indeed the lower credit risk among this cohort of borrowers ), the loan - to - value ratios that were introduced distinguish between first - time buyers and other mortgage borrowers. 15 mccarthy, yvonne and kieran mcquinn ( 2013 ), “ credit conditions in a boom and bust property market ”, central bank of ireland research technical paper, no 8 / rt / 13. see honohan patrick ( 2010, 16 ), “ the irish banking crisis regulatory and financial stability policy 2003 – 2008 : a report to the minister for finance by the governor of the central bank ”. under council regulation ( eu ) no 1024 / 2013 ( ‘ ssmr ’ ) and regulation ( eu ) no 468 / 2014 of the ecb ( ‘ ssmfr ’ ), macroprudential powers, including the capital buffer provisions as transposed into s. i. 158 / of 2014, are shared between the ecb and the national authorities ; meaning, inter alia, that the ecb is capable of setting higher macroprudential ( including buffer ) requirements than those set by national designated authorities ( ndas ). this includes an ecb power to set a capital buffer rate where a national authority has not set any rate. see feedback statement on cp87 : macro - prudential policy for residential 2015 mortgage lending. an overview of national measures is published by the european systemic risk board and can be found https : / / www. esrb. europa. eu / national _ policy / html / index. en. html. see kelly, robert, terry o ’ malley and conor o ’ toole ( 2015 ), “ designing macroprudential policy in mortgage lending : do first time buyers default less? ”, research technical paper, 02rt15, central bank of ireland. bis central bankers ’ speeches the latest data available to the central bank on house purchase prices for first - time buyers nationally suggests the median house price was €200, 000 for the first half of 2015. 16 this is associated with a deposit requirement of 10 per cent of the purchase price. for first - time buyers in dublin, the median purchase price over the period was €262, 000 ; the deposit requirement in this case is 11. 6