in the public interest the central bank is also protecting the consumers of financial services. in concluding my comments on financial stability, i should stress that while the events currently under investigation carry serious reputational risks, they have not given rise to adverse implications for financial stability. profile of banking system one of the unfortunate fallouts from the problems that have arisen is the tarnishing of the image of the irish banking system, which has an excellent reputation internationally. this is most regrettable, as we have a sound and successful banking system that compares very well with international peers. the banks are also one of our largest employers with a workforce of nearly 40, 000. the banking sector accounts for 4 - 5 % of gnp and is a major contributor to government revenue. pensions and other types of savings hold significant shareholdings in banks so that the performance of banks is important for them. the banking industry is vital to this country. i should not pass without a brief reference to the ifsc. as you know, this has been one of our great success stories. the centre has a solid record of success even during the global downturn of the early 90 ’ s. there are now nearly 12, 000 people directly employed in the ifsc making a significant contribution to the economy. in a large industry like the financial services, problems and improper practices inevitably arise from time to time ; this is true of all countries. the most important point is that procedures and processes are in place to deal with them in a timely and expeditious manner, as the financial services regulator is now doing. despite the serious problems that have arisen, i believe that there has been a marked improvement in corporate governance standards in the industry in recent years. any recommendations emanating from the current investigation that suggest further improvements are necessary should be implemented without any delay. i should emphasise that no regulatory system - no matter how extensive or expensive can guarantee that mistakes, inappropriate practices or behaviour will never happen. however, it is essential that when such events occur - despite a comprehensive regulatory system being in place - the regulatory machinery is capable of dealing with them effectively and speedily. i believe that the measures put in place since the mid - nineties together with the forthcoming enactment of the new powers presently at report stage in the dail, will provide such a system. foreign exchange charges there was no statutory control over bank charges prior to the enactment of the central bank act, 1989. section 28 of the 1989 act placed a statutory requirement

around housing and debt, and we have re - estimated all of our model ’ s parameters using advanced methods. you can find details in the appendix in the mpr. we do find that the economy is likely to respond more to higher interest rates at today ’ s debt levels than historically. even so, we have to allow for the possibility that these improved estimates fall short of the mark. furthermore, we have to watch how the household sector reacts to the new rules around mortgage underwriting. it will take time to understand the impact of these changes as well as the economy ’ s sensitivity to higher interest rates. governing council expects that incoming data and new research will shed more light on these four issues as we move forward. there is also a range of other risks that we outline in the mpr, which, taken together, give us a balanced outlook for inflation. as well, there is uncertainty surrounding the possibility of a significant shift toward more - protectionist trade policies in the united states, which we have chosen not to incorporate in our projection. given our recent history with inflation running below target, we continue to be more preoccupied with the downside risks to inflation. the bottom line is that governing council will be cautious in considering future interest rate adjustments and will be guided by incoming data to assess the sensitivity of the economy to interest rates, the evolution of economic capacity, and the dynamics of both wage growth and inflation. with that, senior deputy governor wilkins and i will be happy to take your questions. 2 / 2 bis central bankers'speeches