driven corrections in the housing market. at the international level, the risk factors that i discussed earlier may generate higher mortgage funding costs and / or a downward revision in the prospects for income and employment growth in ireland. at the domestic level, a desirable expansion in the supply of housing would put downward pressure both on rents and house prices. as the national macroprudential authority, we are committed to ensuring that the domestic financial system remains resilient in the event of a reversal in house prices. the ceilings we have placed on loan - to - income ( lti ) and loan - to - value ( ltv ) ratios on mortgage loans are essential in limiting systemic financial risk emanating from the mortgage market. by guarding against excessive mortgage debt at the household level, these measures also serve a vital consumer protection function while also limiting the risk that a house price reversal is amplified at the macroeconomic level through deleveraging pressures on over - extended households. in relation to the financial health of the banking system, the mortgage measures are reinforced by the higher risk weights associated with mortgage lending in ireland under our capital requirements, together with the capital buffers we impose on systemically - important institutions. in discussing the risks associated with the housing market, it is essential also to maintain our focus on the legacy issues from the crisis. i next turn to discussing the management of npls, before turning to the financial conduct concerns that have been brought into sharp relief by the mis - handling of tracker mortgages across the irish banking system. non - performing loans the central bank ’ s work on mortgage arrears and npls spans its financial stability, prudential supervision and consumer protection mandates. within the remit of the central bank ’ s responsibilities, the approach to mortgage arrears resolution is focused on ensuring the fair treatment of borrowers through a strong consumer protection framework, while ensuring that banks are sufficiently capitalised, hold sufficiently conservative provisions, and have the appropriate strategies and operational capacities to resolve arrears. while there has been progress in recent years in reducing the stock of npls in ireland and across the euro area, significant challenges remain. in the absence of pro - active management, the remaining npl stocks may adversely affect the medium - term supply of bank credit and pose financial stability risks through elevated uncertainty regarding the true health of the banking 4 / 7 bis central bankers'speeches system. importantly, these risks render banks especially vulnerable in the event of a future downturn in the economy, such

faced with the substantial costs of redressing misconduct. in relation to the tracker mortgage examination, the main lenders have already made combined provisions of about €900m in respect of the examination, broken down as approximately €600m for redress and compensation and €300m for costs. 6 / 7 bis central bankers'speeches we expect the boards and senior management at our lending institutions to take the lead in rebuilding trust with their customers, their shareholders and the wider public by ensuring that they do not focus on short - term gain at the expense of the long - term interests of the business, its customers and shareholders. conclusions let me conclude. in this speech, i have conveyed the views of the central bank on some of the key economic and regulatory issues that loom large in our 2018 work programme. in relation to macro - financial prospects, we welcome the ongoing flow of strong economic data, which is helping ireland to move beyond the legacy of the crisis. at the same time, we think that ireland is especially exposed to some prominent international tail risk factors. managing this high - growth but high - volatility profile is a major challenge for fiscal policy. turning to the housing market, the same analysis helps to explain why the recovery in house prices has been substantial but that, at the same time, there are material fundamentals - related downside risks. we view our macroprudential policy framework as vitally important in managing these risks. in addition, we are fully committed to ensuring that the high npl stock that remains a legacy of the crisis is worked through in order to build systemic resilience in advance of the next downturn. our mission to safeguard stability and protect consumers means that we are also intent on improving the conduct of lenders, including through the completion of the tracker mortgage examination and our current work on the culture of banking in this country. 7 / 7 bis central bankers'speeches