cloak spun from political yarn ’ opinion, financial times, 2nd november, 2015 available here. the governing council noted in january 2015 that since ‘ potential second - round effects on wage and pricesetting threatened to adversely affect medium - term price developments, this situation required a forceful monetary policy response ’. see introductory statement, january 2015 : www. ecb. europa. eu / press / pr / date / 2015 / html / pr150122 _ 1. en. html see butt, nicholas & domit, silvia & mcleay, michael & thomas, ryland & kirkham, lewis, ( 2012 ), “ what can the money data tell us about the impact of qe?, ” bank of england quarterly bulletin, bank of england, vol. 52, no. 4, pp. 321 – 331 for a detailed discussion of how an asset purchases programme affects money supply. 5 irish responses to the ecb ’ s bank lending survey, july 2016. 6 irish responses to the ecb ’ s bank lending survey, july 2016. 7 see macro - financial review, h1 2016, central bank of ireland. the interest rate for new house purchase loans in ireland stood at 3. 38 per cent as of february 2016. see central bank of ireland, household credit market report, h1 2016, available here. see carroll, james. & mccann, fergal, ( 2016 ) understanding cross - country interest rate variation in europe central bank of ireland quarterly bulletin, 2016, 2, april. 10 sme lending rates, proxied by rates on loans to nfcs of up to €1 million, were 4. 71 per cent in ireland in july 2016, substantially higher than the euro area average sme interest rate of 2. 36 per cent. 11 see central bank of ireland, household credit market report, h1 2016. 12 household debt sustainability continues to improve with both debt - to - income and debt - to - assets levels decreasing. as of q1 2016 household debt as a proportion of disposable income was 149. 4 per cent. debt as a portion of household total assets, is also on a downward trend, falling from a peak of 28 per cent in 2012 to 19 per cent in early 2016. 13 under tltro ii, eligible net lending by banks includes loans to euro area non - financial corporations ( nfcs ) and households, excluding loans to households for house purchase. banks whose eligible net lending exceeds a benchmark can

factors including firm characteristics ( such as size and turnover ), as well as country - level differences. 9 one challenge faced by irish smes is the relatively higher cost of credit compared to those in other euro area countries. since the start of 2014 sme interest rates have declined across the euro area but have remained stubbornly high in ireland. 10 high levels of household and sme debt, a hangover from the irish credit boom, continue to remain a source of vulnerability in terms of both of net worth and servicing costs. higher debt levels negatively affect consumption and investment decisions, compress demand for bank credit, thereby reducing the effectiveness of unconventional monetary policy measures on the real economy. in the household sector, for example debt stood at €148. 5bn in q1 2016 and remains high when compared to our european counterparts. 11 however declines in key indicators suggest an improvement in the sustainability of household balance sheets. 12 as the deleveraging process in the household sector continues, the combined effect of the reformulated credit easing package ( tltro ii ) with the suite of non - standard measures implemented since 2014 should continue to enhance the availability of credit and reduce the cost of funding for both irish households and smes. 13 increased demand for loans for both house purchases and consumption was reported by irish households in the second quarter of 2016. for example, in july growth in credit for consumption of 2 per cent was the highest annual growth rate of credit supply to households since february 2009. 14 year - on - year declines in lending of 6. 4 per cent in july reflect the on - going balance sheet correction of irish corporates. although the accommodative monetary policy stance is envisaged to facilitate increased demand for loans, given corporates desire to fund investment. immediately following the governing council ’ s announcement in march of this year to supplement its asset purchase programme to include purchases of corporate bonds, spreads between a wide range of corporate bond yields and the risk free rate tightened. since then, a number of irish private and semi - state companies already availed of the opportunity to access bond markets, locking in lower interest rates and benefiting from the opportunity to retire more expensive legacy debt. in addition to these impacts on the banking system, households and smes, non - standard monetary policy has clearly influenced developments in government bond markets. over recent months, yields on irish government bonds continued their downward trajectory across the curve, notably following the expansion of the asset purchase programme to include purchases of public