distributed ledger and crypto currencies, may present the largest policy challenges given their complexity and novelty. finally, we note that many fintech start - ups will have limited regulatory expertise and this may present policy challenges in communicating the scope and requirements of the authorisation regime and the role of the central bank. to conclude my remarks on threats associated with innovation, i would like to discuss the topic of shadow banking. as documented in the financial stability board ’ s shadow banking monitoring report 2016, the irish non - bank financial intermediary sector is characterised by a variety of financial activities with varying connections to other countries and financial sectors. its size, including investment funds, money market funds and special purpose vehicles with links to credit intermediation, was just over €2 trillion in ireland at end - 2015. non - bank intermediaries assist financial development and economic growth, through intermediation, risk diversification and promoting market efficiencies. increasingly, non - bank alternatives are competing with banks, requiring the latter to adapt their business models. furthermore, financial stability risks may arise, given the inter - linkages of the non - bank sector with the international financial system. the irish domestic economy has limited direct exposures to the sector, although any adverse developments in it could cause reputational damage to ireland. 4 / 5 bis central bankers'speeches conclusion in conclusion, significant progress has been made in enhancing and improving the resilience, governance and risk management in firms operating in ireland today. however, our job is not done yet. we must ensure that prolonged legacy risks are resolved in a spirit that prevents a recurrence. central to this endeavour is ensuring that a culture of putting consumers first truly exists. a key part of this preparation is for financial services firms to ensure that they improve their overall fitness, agility and ability to drive and manage the continued change and evolutionary pressures they face. as socrates outlined : “ the secret of change is to focus all of your energy not on fighting the old, but on building the new. ” i thank you for your attention. “ behaviour and compliance in organisations, ” fca occasional paper 24, december 2016. see www. fca. org. uk / publication / occasional - papers / op16 - 24. pdf. 2 see central bank of ireland, “ a guide to consumer protection risk assessment, ” march 28th 2017. 3 “ technological innovation and financial services ” address by governor philip r. lane ( 16 june 2016 ) 5 /

of groupthink in some banks and our cross - industry analysis indicates worrying patterns regarding diversity and inclusion – with resultant concerns regarding culture and challenge. furthermore, in line with the central bank ’ s new consumer protection risk assessment ( cpra ) model, firms need to ensure that the appropriate internal risk frameworks are in place to identify and mitigate risks to their customers. 2 3 ) cybersecurity / it risk further change is required with respect to mitigating it risk. the recent cybersecurity incidents arising from the wannacry ransomware attack highlight the risks. while we have seen good and improving practices across many financial services firms, we also have observed material weaknesses in basic management, including patching, that need to be addressed. there are widespread and fundamental issues across the industry on identifying, detecting and protecting against cybersecurity risks. these flaws are matched by concerning deficiencies in the capability of firms to respond and recover from cybersecurity attacks. together with the management of legacy infrastructure risks, this creates major change imperatives. fortunately, in the case of the recent cybersecurity incident, no bank operating in ireland was directly affected. nonetheless, the threats are real and are increasing in complexity and potential impact. put bluntly, this threat could affect the banking system ’ s ability to deliver its core functions. the macro - financial environment the macro - financial environment for financial services firms in ireland is changing. while the low interest rate environment remains in place, the prospect of a reversal in term premia and risk premia is prominent in discussions in international fora in relation to financial stability risks. there are also significant international regulatory changes in progress, including in relation to the 2 / 5 bis central bankers'speeches capital requirements directive, the basel framework and the second markets in financial instruments directive. given its importance, i will say a few words on brexit. at this stage, it is impossible to say with any certainty how brexit will affect financial services across the globe. however, given the importance of london on the global stage, it is clear that there will be sizeable effects – both in the short and long term. from a systemic perspective, london will undoubtedly remain a major financial services hub. but it is also seems certain that elements of the capital markets activity currently undertaken in london will migrate to the remaining european union members. the central bank has communicated regularly about the implications of brexit, both in relation to the economic impact on