insurance entities to sole - trading advisors – are continuing to operate in a regulated environment with no need for further assistance. it is important to keep this in perspective as we consider the future of regulation. many of the larger entities are foreign - owned : i especially welcome the participation of sound and well - managed foreign - owned financial firms in our economy, whether focused mainly on export business, or providing financial services locally. unfortunately as we are all well aware, a handful of ifsc firms – including one very large firm – got into serious difficulties in the past 30 months. even though primary supervisory responsibility in the larger cases lay elsewhere, we need to be continually vigilant to ensure that emergent problems are detected and forestalled in such firms also. much of the regulatory activity around the ifsc is of a routine character : for example, ensuring that the prospectuses of funds and securities that are listed here satisfy the requirements of eu directives. speed, reliability and accuracy in providing this assurance is something on which the relevant departments of my organisation pride themselves. they know they perform a modest but significant role in protecting investors all over the world. externally - determined requirements here continue to grow, placing additional demands on this segment of regulation ; we will meet these demands. with the continued welcome flow of new entrants, it is evident that more regulatory resources will have to be devoted to the task of assessing applications and monitoring approved firms. given the pressures on the public finances, i am forming the opinion that we can not expect the public purse ( through the central bank ) to continue indefinitely its practice of, in effect, paying half of the costs of regulation. moving to a 100 per cent charge - back arrangement for at least some of these activities seems inevitable to me. this may not be music to your ears, even though the costs involved are low in general relative to the scale of activities. there has been much international discussion in recent months about the desirability of far - reaching changes in the regulation of financial firms in the years ahead. many of the ideas that are floating around are very old – some of them none the worse for that. few are entirely original. they include the aspiration of much higher risk capital requirements, specific requirements to hold liquid assets, the creation of narrow banks focused on public utility services and higher taxation of banking and finance. i don ’ t have time to discuss all of these, some of which i have written about in the past. here too the international developments will

spending decisions. housing costs also influence where people choose to live or work. similarly, changes in commercial property prices and rents can affect businesses ’ profitability and net worth, as well as their ability to access capital. more broadly, construction is an important component of economic activity, with employment in the sector accounting for around 7 % of total employment in ireland. so there are a number of channels through which property markets interact with the broader economy. there are other factors that make property unique from a macro - financial perspective. first, in economic terms, property operates both as an investment asset and a consumption good. households or companies may purchase a property with different intentions : they could occupy it ( so, in our economic jargon, use it primarily for consumption purposes ). or they could treat it as an investment. given this dual role of property, demand for property purchases can be influenced by expectations of future capital appreciation. this can create pro - cyclical dynamics in property markets, especially if households or businesses form expectations about the future based on recent trends. second, property purchases are financed partly through debt. this creates a very strong link between the property market, financial intermediaries – such as banks or non - bank lenders – and the broader economy. this link has also grown significantly over time. globally, for example, the share of residential and commercial mortgages in banks ’ total lending portfolios has roughly doubled over the course of a century – from about 30 % in 1900 to close to 60 % in 2010. 2 this has also been the case in ireland, where the banking system now has a higher - than - average concentration on real estate lending relative to the rest of europe. 3 third, property is a key source of collateral across the economy. this creates a strong link between what happens to property valuations and the ease of financing conditions for the economy as a whole. in a rising property market, lenders are often willing to lend more and at easier terms, as the value of the collateral increases. at the same time, households and business may seek to borrow more, including to invest back in the property market. this can lead to further increases in property values, creating an endogenous dynamic that can eventually become unsustainable, reversing abruptly when adverse shocks hit. the combination of these factors means that the nature of financing matters, not just for the functioning of property markets themselves, but for the broader economy and society as a whole. the historical evidence here is