, investors were unaware of the creditworthiness of the root asset and the potential difficulties with the liquidity of the instrument itself. compounding the problems was the fact that the models upon which these structured products were valued assumed that they could be readily traded in a liquid market. in august, that assumption was tested and found not to be fully warranted. i do want to emphasize that there were significant benefits to the development of these new, complex instruments. they provided the ability to separate different types of risk, such as credit or market risk. this promoted better risk management and allowed these risks to be borne by those best able to do so. both banks and non - banking institutions created different types of loans that could be packaged and sold to different investors across the global economy. and taking many loans off balance sheets enhanced the ability of the banking sector to originate new loans while remaining well capitalized. as i mentioned earlier, central bankers had been worried for quite some time that credit spreads were not appropriately reflecting risk. so, we welcomed the re - pricing of risk that began in the spring of this year. indeed, by may, we saw spreads on high - yield corporate bonds and emerging - market bonds beginning to widen to levels closer to historical norms. we also saw a re - pricing of u. s. subprime mortgages to reflect rising delinquency rates. this process meant that some people who had taken on a great deal of risk had to face losses. but in general, the necessary re - pricing of risk was proceeding, and markets were functioning properly. in august, however, the process hit a fairly major bump in the road. to begin with, we saw that the spread of the risks inherent in structured products also meant a wide dissemination of any underlying problems associated with the assets at the root of these instruments. moreover, the complexity and lack of transparency in many of the structured products added to the market dislocations. it was extremely difficult for investors to peel back the layers of these securities and derivatives to determine, with confidence, both the creditworthiness of the assets backing a particular security and the market value of the security itself. even supposedly sophisticated investors became extremely uncertain and that, in turn, led to fear. such fear made markets less liquid – the money market in particular – and the " wall of liquidity " evaporated under the summer sun. investors sought shelter and security in the least risky, shortest - term, and most transparent assets. the

##zone. that certainly would have to be a long - term objective but we still have a fair deal of fragmentation here and local conditions do matter. one of the consequences of the financial bust was the way banks ran themselves. now, we ’ ve been finding out quite recently about a mortgage overcharging scandal in this country by irish banks that carried on after the financial bust. a lot of people were of the view that the banks just haven ’ t changed their culture. they expected because frankfurt was getting more involved in regulation and oversight that they would. but they don ’ t seem to be afraid of you guys or the irish central bank ; why not? as you know, the way we are organised under european law is that we – in frankfurt we are doing banking supervision, which means prudential supervision, while national authorities – including the central bank of ireland – are doing consumer protection. so that ’ s totally consistent. these are mutually reinforcing. we totally share the objectives that banks should put their clients first and they have a duty towards their clients. if there is any breach in terms of if there is any misconduct in that sense, that should be acted upon. but the way it ’ s organised, if the cbi do it, they are doing it quite well so it helps supervision. i believe that good supervision also helps consumer protection, but these are two different tasks. so it ’ s up to the irish central bank really to sort this problem? absolutely – and they are doing it. brexit is obviously something that a lot of people in this country in particular are worried about because we ’ re so heavily exposed. what ’ s the ecb ’ s view on how brexit might impact on the euro area, but particularly on ireland? so far what we can see that the economic impact has been milder than expected. that ’ s mainly because our economy in the eurozone and also in ireland has been much stronger than expected. so the expansion is now very robust both in ireland and also at eurozone level. that has allowed our economies to weather the shock in a very positive way. that said, we have to turn to the long term. it ’ s very difficult to argue that brexit in the long term would be a positive proposition ; it ’ s going to be negative. i really trust the political process to deliver a deal, whatever it looks like, which will minimise the cost. for that we have to defer to