the balance being made up by subordinated loan capital. xviii ordinary shares, however, were found to be the main effective loss - absorbing instrument on a going concern basis. in response to the crisis, european legislation was agreed to create a safer financial sector. a key aspect is the establishment of a more robust framework for setting minimum capital requirements. the capital requirements regulation ( crr ) and capital requirements directive ( crd iv ) were agreed in 2013 and revised the capital requirements for banks. the framework provides for a pillar i requirement, which is the regulatory minimum amount of capital that banks must hold. this is a minimum total capital ratio of 8 % of their risk weighted assets ( rwa ). as part of those revisions, the highest quality capital, common equity tier 1 ( cet1 ), typical items of which include ordinary shares and reserves, must now, following various deductions and adjustments, correspond to 4. 5 % of rwa. pillar ii is an additional capital requirement that may be applied to institutions by supervisors and is based on the supervisory review and evaluation process ( srep ). the institution specific nature of pillar ii ensures that a bank ’ s capital is tailored to their individual business models and risk profiles. in addition to the pillar ii capital requirement, competent authorities may also set non - binding pillar ii capital guidance that relevant banks will be expected to hold. the combined buffer requirement is the collective term for the four capital buffers provided for in crdiv. this includes the aforementioned ccyb and o - sii buffer, as well as the capital conservation buffer and systemic risk buffer. the combined buffers act firstly as a mechanism for procyclical accumulation of capital, so that institutions can build a store of supplementary own funds in ‘ good times ’ in order to protect their regulatory minimum during periods of adverse conditions. if a bank breaches the buffer, automatic safeguards apply to limit the amount of dividends and bonus payments it can make. the key point here, however, is buffers must be made of cet1, the highest quality capital. and much progress has been made, since the end of 2014, the fully loaded cet1 ratio of significant institutions in ireland has increased from 9. 4 per cent to 17. 7 per cent at end - 2017. so in short, the third key lesson from the crisis i want to mention today was that, in addition to the level, the type and quality of capital matter. progress has been

measures to deal with what they reasonably considered to be a once in a century event. what we are seeing now – the geopolitical and financial system disruption, the challenges and threats arising from developments in technology, the fragmentation of our financial system – all the indications are that these are not once off events, may well be our new norm ( at least for the foreseeable future ), and that the pace of change may even accelerate with the advent of artificial intelligence, crypto capability and other technological innovations. in these circumstances, the previously seen monetary, fiscal and regulatory responses will not, and cannot be as accommodative going forward. it would be inappropriate, unwise and unsafe to relax regulation, or provide long - term latitude, just at the moment when risks to the system and consumers are becoming greater, or at least becoming more unpredictable. now, having sounded my customary words of caution, i want to turn my thoughts to the future of credit unions, and how i see the sector playing an enhanced, and perhaps more complete role in the provision of financial services to irish consumers and businesses. 5 / 9 bis - central bankers'speeches the future of credit unions i opened my comments this morning with a quote from heraclitus, relating to change being a constant, and rivers always changing. i am sure that heraclitus'teachings feature in the presentations of many a change management consultant. as another of his maxims, which has also survived for centuries and i am sure is often quoted, is that " big results require big ambitions. " david [ malone ] – i read your recent interview with accountancy ireland with real interest, the article that was entitled " credit unions : transforming ireland's financial landscape. " you spoke about how you saw credit unions " becoming primary financial institutions of choice, migrating from the periphery to the front and centre of the financial services landscape. " this is what heraclitus might describe as a " big ambition, " but in my mind, it is one that is eminently achievable – with a clear vision, and the right strategy. while it is undeniably true that the relatively small size of ireland's market means there will be a ceiling on the number of financial services providers that can serve our market profitably, there is always room for new or even existing providers to gain market share where their value proposition is one that satisfies the needs of existing and prospective customers. you don't need