crisis. this principle is reflected in the ecb ’ s new microprudential and macroprudential competences, including the power to top up national macroprudential measures. let me now turn to the second argument against inflation targeting : its apparent inability to engineer a quicker recovery in economic activity and inflation. to provide you with some additional figures, it took the euro area almost eight years before real gdp reached the 2008 q1 level again, which marked the previous peak. likewise, hicp inflation has been considerably below 2 % since the second half of 2013, and only more recently started to move closer to its objective. this increase in headline inflation was however mainly driven by rising energy and food prices and not accompanied by the evolution of underlying inflation. 8 price and nominal gdp level targeting see, for instance, de grauwe ( 2007 ) and eichengreen et al. ( 2011 ). see svensson ( 2016 ). a fair assessment of the performance of inflation targeting, however, also has to acknowledge that the euro area like all other major inflation ‐ targeting jurisdictions has avoided the risk of falling into a deflationary spiral from materialising. against this background, some commentators argue that inflation targets should be replaced with some sort of level target. the two most prominent examples are price level targeting and nominal gdp level targeting, where central bank aim to stabilise the price level and nominal gdp respectively along some target path. proponents of level targeting strategies argue that they allow for a more powerful management of private sector expectations, leading to better stabilisation outcomes than under inflation targeting. 9 in the case of a price level target, if there is downward pressure on the inflation rate so that the price level falls below its target path, then future inflation has to be temporarily higher in order to bring the price level back on track. in theory, the private sector would internalise these dynamics and increase its inflation expectations every time there is downward pressure on the price level. in turn, higher expected inflation would mitigate the downward pressure on today ’ s inflation rate. this expectations channel of monetary policy transmission associated with level targeting strategies is especially compelling in a low interest rate environment where the effective lower bound on nominal interest rates limits the scope for counteracting downward pressure on inflation rates by reducing current policy rates. 10 indeed, in the united states, some central bankers have publicly called for a temporary adoption of a level target. 11 in spite of these appealing arguments based on monetary theory, level targeting

of groupthink in some banks and our cross - industry analysis indicates worrying patterns regarding diversity and inclusion – with resultant concerns regarding culture and challenge. furthermore, in line with the central bank ’ s new consumer protection risk assessment ( cpra ) model, firms need to ensure that the appropriate internal risk frameworks are in place to identify and mitigate risks to their customers. 2 3 ) cybersecurity / it risk further change is required with respect to mitigating it risk. the recent cybersecurity incidents arising from the wannacry ransomware attack highlight the risks. while we have seen good and improving practices across many financial services firms, we also have observed material weaknesses in basic management, including patching, that need to be addressed. there are widespread and fundamental issues across the industry on identifying, detecting and protecting against cybersecurity risks. these flaws are matched by concerning deficiencies in the capability of firms to respond and recover from cybersecurity attacks. together with the management of legacy infrastructure risks, this creates major change imperatives. fortunately, in the case of the recent cybersecurity incident, no bank operating in ireland was directly affected. nonetheless, the threats are real and are increasing in complexity and potential impact. put bluntly, this threat could affect the banking system ’ s ability to deliver its core functions. the macro - financial environment the macro - financial environment for financial services firms in ireland is changing. while the low interest rate environment remains in place, the prospect of a reversal in term premia and risk premia is prominent in discussions in international fora in relation to financial stability risks. there are also significant international regulatory changes in progress, including in relation to the 2 / 5 bis central bankers'speeches capital requirements directive, the basel framework and the second markets in financial instruments directive. given its importance, i will say a few words on brexit. at this stage, it is impossible to say with any certainty how brexit will affect financial services across the globe. however, given the importance of london on the global stage, it is clear that there will be sizeable effects – both in the short and long term. from a systemic perspective, london will undoubtedly remain a major financial services hub. but it is also seems certain that elements of the capital markets activity currently undertaken in london will migrate to the remaining european union members. the central bank has communicated regularly about the implications of brexit, both in relation to the economic impact on