matthew elderfield : central bank of ireland ’ s progress in improving financial regulation and supervision opening statement by mr matthew elderfield, deputy governor of the central bank of ireland, to the public accounts committee, dublin, 13 june 2013. * * * i would like to thank the committee for inviting me back to discuss the progress that has been made in improving financial regulation and supervision since i was last here in may 2010, at which time we discussed the comptroller and auditor general ’ s report on the lessons of the financial crisis. there is a lot of ground we could cover, but i think that is best done through our discussion, so let me be extremely brief in my opening remarks. i would like to spend just a few minutes to describe the progress that has been made in three key areas : supervisory capability and approach, regulatory standards and powers and, finally, regulatory philosophy, including the role of enforcement. and then let me just mention one final loose end from the cag ’ s special report 72, which relates to auditor assurance statements. but can i just sound a note of caution at the outset : while good progress has been made in improving financial regulation and supervision in ireland, we are by no means all the way there yet. indeed, as a supervisor you are almost always playing catch up with industry and it is dangerous to think you will get to a point when you can rest on your laurels. so, it is important to maintain the momentum of improvements, to keep the regulatory framework up to date and to ensure supervisory capabilities are always at their best. it ’ s also especially important to be vigilant against backsliding and attempts to compromise the independence or dilute the diligence of regulation, especially when times start to get good. in terms of supervisory capability and approach, it was clear that supervision was underresourced in a range of areas and therefore staffing levels have necessarily increased in the last few years. my original estimation was that the regulatory function of the central bank would need to be some 725 persons - strong, but based on experience, process improvements and efficiencies, i would think that a target level of around 600 is sensible for the end of the current three year central bank strategy in 2015. continually striving to improve quality is also important, by ensuring the right mix of experience and investing in training, so that your supervisors have the skills to challenge firms effectively. ensuring that the central bank can attract and retain the skills it needs

with the objective at all times of supporting them through this time. we are carefully supervising this process to ensure our expectations are being met. 23 https : / / www. centralbank. ie / news / article / speeche - risks - resilience - and - policy - responses - to - covid - 19 - sharon - donnery - 17 - jun - 20 3 / 7 11 / 02 / 2021 risks, resilience and policy responses to covid - 19 - deputy governor sharon donnery the resilience of borrowers is of course intertwined with that of the lenders. banking crises cast the longest shadow, especially those fuelled by credit. avoiding such a scenario is therefore paramount. 24 as lenders can ease or amplify an economic crisis, their resilience is central to minimise potential scarring. through the steps taken in recent years, the domestic banks are now more resilient today than they were in the past. the capital requirements imposed on banks have ensured that they are better prepared for economic shocks such as the one we now face. in addition, the lending practices of the domestic banks have been more prudent in recent years than in the run - up to the nancial crisis and they are also able to rely on capital buffers to absorb losses and continue to lend to the economy. the banks do, however, have signi cant exposures to the sectors most affected by covid - 19, and their pro tability had fallen in the run - up to the pandemic. in other words, the resilience of the banks is not unlimited. the banking system is expected to make losses, the scale of which will depend on the evolution of the virus and the scarring effects of this crisis. beyond domestic resilience, the interconnections of the nancial system in a time of global crisis will also have a bearing. the investment fund sector globally saw large redemptions in march, and the subsequent “ dash for cash ” - especially dollars - put signi cant pressure on other markets, markets that had previously been seen as safe and liquid. this tightening of global nancial conditions was partly mitigated by central bank interventions. over time, the question over the extent to which structural vulnerabilities from liquidity mismatches and leverage in the global funds sector contributed to market disruption will need to be addressed. policy responses now let me turn to the policy responses, both domestic and