accumulation on fiscal and financial buffers that will allow ireland to cope more easily with future downside shocks. turning to institution - specific determinants of financial sector performance, i then highlighted the expectations of the central bank in relation to the duties of bank directors with regard to governance and internal controls ; culture and behaviour ; and diversity and inclusion. i emphasised that bank directors are responsible for ensuring that the banks that they lead are well governed and develop organisational cultures that deliver for consumers and the wider economy. the next few weeks and months will tell us much about the future eu27 - uk relationship : however it turns out, the central bank of ireland will be focused on the resilience of the financial system, in order to mitigate the adverse impact of brexit ( whether hard or soft ) on the irish economy. 1 this section follows my 19th november speech “ irish economic developments : an update ” ( consulate general of ireland, new york ). 2 regulatory checks will also be needed for goods moving from great britain to northern ireland, given the commitment under the withdrawal agreement to ensure no hard border on the island of ireland. 3 see crowley, meredith, oliver exton and lu han ( 2018 ), “ renegotiation of trade agreements and firm exporting decisions : evidence from the impact of brexit on uk exports, ” mimeo, university of cambridge. douch, mustapha, edwards t. huw and christian soegaard ( 2018 ), “ the trade effects of the brexit announcement shock, ” the warwick economics research paper series 1176. 4 the central bank of ireland has been processing applications for authorisations of new entities or the expansion of activities by existing entities. it is imperative that firms that have not yet activated brexit plans do so as soon as possible, given the limited time window before the end of march and the importance of having valid authorisations for all scenarios. 5 kok, christoffer, csaba more, and cosimo pancaro ( 2015 ), “ bank profitability challenges in euro area banks : the role of cyclical and structural factors, ” financial stability review 1, european central bank. 6 see for example, berger, allen n., and david b. humphrey ( 1997 ), “ efficiency of financial institutions : international survey and directions for future research. ” european journal of operational research 98. 2 ( 1997 ) : 175 – 212. molyneux, philip, and

philip r lane : macroeconomics and banking in ireland address by mr philip r lane, governor of the central bank of ireland, to the certified bank director annual conference, institute of bankers, dublin, 29 november 2018. * * * introduction i welcome the opportunity to address the certified bank director annual conference. in addition to taking responsibility for firm - specific strategies and risk management, it is essential that bank directors also understand the macroeconomic environment : after all, the primary driver of the aggregate performance of the banking sector will be the overall state of the economy. this should be painfully obvious for an irish audience : while there were important differences across individual banks during the boom - bust - recovery cycle, the profits and losses of the banks were ( and remain ) highly correlated with the domestic economy. accordingly, the first part of this speech will focus on macroeconomic and systemic issues 1. in the second part, i will turn to bank - specific factors and, in particular, i will turn my attention to the expectations of the central bank in relation to the duties of bank directors. the macroeconomic environment the irish economy is currently experiencing a sustained expansion phase. the sectoral pattern of growth is broadly based across both export - orientated sectors and domestically - orientated sectors, with both irish - owned firms and multinational firms contributing to job creation and new investment. as a result, there has been significant increases in employment and income, which has fostered an uptick in consumer spending. domestic demand is further supported by the ongoing recovery across the various investment categories. the projections for the labour market continue to signal that the economy is moving towards full employment, although some extra capacity is possible through further inward migration and increased participation in the labour market. nevertheless, under the central forecast, capacity is set to tighten further in coming years. while recognising the positive baseline forecast, the intrinsic volatility of the irish economy means that there can be sudden and sizeable adverse shifts in fundamentals. given this volatility, macro - financial risk management should have two aims. first, policy actions should not amplify pro - cyclical dynamics, if overheating risks in the economy and the financial system are to be contained. second, macro - financial resilience requires buffers to be accumulated during good times that will enable ireland to cope more easily with future downside shocks. in relation to the financial system, our macroprudential policies such as the countercyclical capital buffer that we triggered