half of 2016, profits were 6 percent lower than in the same period in 2015, reflecting the challenging operating environment. we are starting to see some signs of increased competition and a strong desire from the banks to start to grow their loan books once more, both in ireland and in the uk. this is welcome, provided lending is prudent, and provides evidence of the continuing return towards normalisation of the domestic banking sector. non - performing loans ( npls ) irish banks continue to work out non - performing loans and much progress has been made. indeed, irish banks are somewhat ahead of european banks in addressing these issues. in absolute terms, npls have declined by just over €48. 5bn or 57 percent since their peak in 2013, now representing 17. 3 percent of all loans. although decreasing – due in large part to a range of 1 / 6 bis central bankers'speeches intensive supervisory actions, progress within institutions, as well as the improving economy – the outstanding numbers remain high both in absolute and relative terms. retail mortgages are the largest component of total npls, accounting for 57 percent, and are falling more slowly than other categories, despite the clear momentum in their reduction. sme / corporate loans represent 17 percent of npls, commercial real estate ( cre ) loans amount to 22 percent, and consumer loans account for approximately 3 percent of total npls. financial strength in terms of the ability of the banks to absorb shocks or unexpected losses, all of the retail banks exceed the regulatory capital minima. as banks move towards new ( ‘ fully - loaded ’ ) regulatory capital requirements, capital ratios on this basis are 15. 2 percent on average. the recent euwide stress test included two of the domestic retail banks ( aib and boi ), and illustrated that these banks would have enough capital over three years to withstand the adverse economic scenario. however, their key capital ratios would have declined to 7. 4 and 7. 7 percent under this adverse scenario. the main driver of this outcome was a projected increase in credit impairments, consistent with recent loss history in ireland. it is noteworthy that the stress testing assumptions and method were particularly challenging for those banks and countries that had suffered the most significant losses during the crisis and were most reliant on interest income. nonetheless it is a timely reminder that much remains to be done to improve the resilience of the domestically focused banks operating in ireland. financial strength will remain a focus for the central bank together with the

the ssm, both in terms of the day - to - day work and the bank having a seat at the ecb supervisory board, which is responsible for supervision. my colleague here today, ed sibley, attends the supervisory board with our deputy governor for financial regulation, cyril roux. staff in the bank are committed and strive to be influential at every level to ensure the right supervisory outcomes are delivered for all euro area banks, and particularly those operating in ireland. staff engage in direct supervision via joint supervision teams ( jsts ) and in inspection teams composed of staff from the central bank of ireland, based in dublin, and ecb staff, based in frankfurt. we also contribute to analytical work on risk assessments and policy development. under the new supervisory architecture, regardless of the jurisdiction, banks operate under the same methodology, processes, standards and quality assurance that are 3 / 6 bis central bankers'speeches applied. both since the crisis, and since the establishment of the ssm in november 2014, we have conducted 35 inspections of irish banks supervised by the ssm. these inspections last on average 13 weeks. this intensive action, on - going supervision, and supervisory priorities reflect the risks i have already mentioned : npls, business model sustainability, and the quality of risk management in an uncertain world. these are also the key areas for the ecb and euro area banks more broadly as we move into 2017. 4 in terms of specifics, the ecb is undertaking a thematic review regarding the sustainability of bank business models. following the publication of the ‘ ecb guidance to banks on npls ’, the ecb will – via its taskforce on npls – continue its review of institutions with high levels of npls and initiate actions for joint supervision teams to follow - up. it is noteworthy that the central bank of ireland has been leading this work, which reflects the high level of expertise and capability we have in the central bank in dealing with npls. throughout ecb banking supervision, there is a focus on several aspects of banks ’ risk management. various strands of work include assessments of the ability of banks to aggregate and measure their risks effectively, calculate risk weights prudently, and continue to improve on their own internal processes for capital, liquidity, and associated risks. turning to the second pillar of banking union, the single resolution mechanism is now also up and running. the 2016 resolution plans for the irish significant institutions have been completed and endorsed by the single resolution board ( srb )