. this was also the case during the swedish banking crisis at the beginning of the 1990s. is the growth in credit worrying? so what is the situation at present? figures for april show that total lending to the general public is up 7. 3 % compared with april 1999. the main growth is in household lending, which has risen by 8. 8 %, while corporate lending has increased by 4. 1 %. 1 a perspective on these figures can be obtained if we consider them in relation to gdp. this gives a measure of whether lending is growing at a faster rate than the economy as a whole, which provides us with an indication of whether imbalances are being built up. corporate lending in relation to gdp has remained relatively constant over the last four years, and is currently far below the levels which prevailed at the end of the 1980s. the financial statements presented by companies are also currently strong, which suggests good solvency. in this context, i would also like to point out that those companies within the “ new economy ” that are currently very much in the news and which show weak profitability finance themselves primarily via the risk capital market and not via bank loans. this means that a possible downturn in this part of the corporate sector should only have limited direct effects on the banks. in terms of household lending, the situation is rather different. lending to households has risen relatively strongly over the last two years and currently amounts to over 40 % of gdp. it is therefore approaching the levels we saw at the end of the 1980s. however, it should be stressed that households ’ interest expenses are currently lower due to the low interest rates. this rise in lending is also reflected in the household debt ratio, i. e. debts in relation to disposable income, which has risen and which now amounts to 104 %. households are borrowing to an increasing extent, at the same time as their economic situation has improved as a result of rising disposable incomes and falling unemployment. households have traditionally borrowed mostly for housing, and the current increase in this type of lending is perhaps not so surprising in view of the fact that housing prices in metropolitan areas have risen relatively significantly. what is more remarkable is that lending for other purposes is increasing at a higher rate. it is difficult to see from the statistics exactly how the borrowed money is used, but lending both from banks and finance companies is now growing at a faster rate than lending from mortgage institutions. this has given rise to apprehensions that households are

equity, and discounted debt buybacks. still, it is pretty clear that the government will be acquiring additional equity stakes. while i ’ m not yet in a position to put a number on it, i can say that the overall net cost to the state of recapitalisation will be manageable. indeed, the recapitalisation will ensure that the banks are clearly seen as strong, financially self - reliant entities able to fund themselves in the market into the future. by the same token, the overhang of the banking situation on the state ’ s finances will be removed. these transactions are thus a key ingredient in moving both the banking and the budgetary situation forward. as the market digests and acknowledges these new realities, we can expect a further tightening of borrowing spreads. this may all seem a little removed from your immediate preoccupation, which is the job market. but i think you will agree that an overall economic pick - up in ireland offers the best route to improved job prospects here for yourselves, and that pick - up will depend on a speedy resolution of the budgetary and banking problems. those of you who have the ambition and capacity to start on a career of entrepreneurship have an even more direct interest in ensuring that the banks are functioning providers of credit. i think it ’ s fair to say – and what data we have seems to bear this out – that banks in ireland have reacted to their own difficulties and to the downturn by greatly reducing their risk appetite. some of this was a necessary adjustment, but the result has been limited availability of credit for start - up firms and smes. indeed, i have the impression that, during the years of property - based lending, the banks have lost their edge in small business lending. this is something that they need to pay more attention to, not just for the sake of the economy, but for their own business performance in the years ahead when property - based lending will be on a much more limited scale. a number of new initiatives have been floated in this regard. it is important that the banks get going now on improving their techniques for making sound small business loans. at the aggregate level, the pace of economic activity and the trend in unemployment still remain weak. the decline in aggregate income is bottoming out, but ( in the second quarter of 2010 ) at a level perhaps 16 per cent lower than at the peak. ( that ’ s gnp : economic activity, measured by gdp it is about