by the central bank. on the ground, the differences you will note if your firm is in this category are more effective liaison with your direct supervisory team as well as more frequent on - site visits with yourselves by my staff. i will be asking my supervisors to look more closely at where those investor protection and financial stability risks i talked about earlier exist, including challenging assumptions that lie behind business models and strategies in the sector and the governance, systems and controls that underpin them. in contrast, each individual fund, in itself, has a limited potential impact on financial stability and investors in the event of failure – and so, each of the more than 5, 000 funds domiciled in this jurisdiction – cannot and should not expect the same level of supervisory engagement as afforded to the fund service providers. our supervisory model, however, does provide capacity for us to react to triggers and problems that emerge in individual funds as well as random spot - checks. we will also increasingly rely on the use of our thematic supervisory tool, namely examining a specific issue across a cross - section of institutions. shadow banking while individual funds may be low impact entities in our supervisory model, the funds industry is of course a high impact sector viewed collectively. this is not just a question of investor protection. increasingly, the interest of the international regulatory community is directed at the level of systemic risk posed by particular parts of the funds industry, namely money market funds. the backdrop to this interest is the risk of investor runs on money market funds as a result of a threat of breaking the buck and the onward impact of such a run on the markets in which those money market funds are invested. as you are no doubt aware, this is clearly on the regulatory agenda at the g20, in iosco, at the european commission and also in the us at the sec. a few concluding thoughts on the regulatory agenda in this area. my first high - level message, is that the industry in ireland must be prepared for change. during the financial crisis, investor runs on mmfs led to a disruption in the flow of finance to bis central bankers ’ speeches the real economy and necessitated dramatic interventions by public financial authorities. the central bank believes that regulatory reform should focus on the need to reduce the probability of investor runs, to curb implicit support from sponsors and to reduce the need for support from the taxpayer. in order to avoid disruptive industry shifts, my preference is for international alignment between europe and the us in this area. it appears that the sec

98 % for aib, 14. 3 % for bank of ireland and 19. 08 % for ilp. the recent european banking authority capital raising exercise did not require further injections for the irish banks. the banks therefore have a substantial capital buffer with which to absorb losses on their mortgage portfolios. the central bank believes it is time to do just that and is encouraging a more realistic approach to provisioning and, as i will explain below, we would like to see a determined effort to identify unsustainable mortgages requiring loan modification. where does that leave the banks ’ capital position for the future? we already know that over the medium term, in the period leading up to implementation of basel 3 in 2019, that the banks will likely require more capital. at the two pillar banks, the elimination of deferred tax assets in the order of about €5 billion will have to be met through utilisation of taxable profits, or, to the extent that profits are not available, through additional capital. therefore, the sooner the banks can be restored to profitability then the better they will be able to meet these medium term targets, ideally from market sources. for the mortgage portfolios, the blackrock loan loss estimates provide a very large buffer. still, house prices have trended closer to the stress scenario and there are considerable uncertainties regarding the impact of the forthcoming bankruptcy law reform on borrower behaviour, of the economic and employment outlook and therefore of future arrears trends. the banks are also struggling to return to profitability as their basel 3 requirements loom and will start to feed into future stress tests. there is also uncertainty about the size of the unsustainable mortgages group, how many of these can be resolved through loan modification and at what cost, and how many instead are likely to be subject to repossession or voluntary surrender. this is an area where we want the banks to make substantial progress during the course of the year. the greater clarity we can have about the levels of loan modification based on a more refined analysis of the different cohorts of mortgage customer, then we will be in a stronger position for recalculating and updating the stress capital position of the banks. by conducting the 2012 pcar in the autumn there is more time to do this analysis. the policy framework for addressing mortgage arrears before i talk about what we have seen in the banks ’ most recent mortgage arrears resolution strategies and explain “