ed sibley : opening statement - joint oireachtas committee on finance, public expenditure and reform, and taoiseach opening statement by mr ed sibley, deputy governor ( prudential regulation ) of the central bank of ireland, before the joint oireachtas ( national parliament ) committee on finance, public expenditure and reform, and taoiseach ( head of parliament ), dublin, 15 december 2020. * * * good afternoon chairman, committee members, i am joined today by grainne mcevoy, director of consumer protection. we welcome the opportunity to appear before you today and discuss banking matters and hear committee members ’ views on the sector. firstly, i would like to address the committee ’ s invitation to discuss the natwest strategic review of ulster bank ’ s future direction. in order for us to supervise effectively, and for connected legal prohibition reasons, we are not able to publicly discuss our engagement with individual firms on confidential matters. in the same vein, it would be inappropriate for us to appear at a hearing with a regulated firm. this is why we respectfully declined the request to attend last week ’ s meeting. we indicated in our response that we remained available, as always, to the committee on all matters relating to our mandate. we take our engagement with this committee, and our accountability to the oireachtas, very seriously. such engagement is one of several ways in which we demonstrate accountability for the work we undertake in safeguarding monetary and financial stability and working to ensure that the financial system operates in the best interests of consumers and the wider economy. we would welcome the opportunity to discuss further how we can improve our engagement with the committee, such that we can help support you in meeting your objectives. i will now briefly outline some of our current areas of focus in relation to the retail banks in ireland, with households, businesses and the wider community as a whole to the forefront of our minds. covid - 19 much of the central bank ’ s focus this year has been on mitigating the unprecedented impact of the covid - 19 pandemic. the central bank ’ s intertwined responsibilities – consumer protection ; monetary policy ; prudential regulation ; payments, and so on – have strong interconnections with each other. this positions us well to understand and mitigate the effects of the pandemic – including through monetary policy, macro prudential tools and supervision. distressed debt a key priority for us is that there are suitable supports in

the experience of their international peers in that margins on traditional business had fallen over the longer term. however, because of the high level of demand in ireland, profitability was maintained without recourse to investing in structured products or conduits as described earlier. the re - pricing of risk in international financial markets and the associated turmoil was triggered in mid - 2007 when international investors became nervous about the underlying value of their investments in assets that consisted of pools of us subprime mortgages. these assets had been created under the “ originate and distribute ” model whereby mortgages were issued to borrowers by an originator ( i. e., a bank or broker ) but were subsequently packaged together and sold on to investors. an increasing number of these mortgages have become non - performing since mid - 2005. these losses became an international problem, as many of the investors including banks that had bought these assets were located outside the us. uncertainty about the size and the identity of those investors holding the losses gave rise to increased risk aversion in the marketplace and marking down of the value of these types of assets. the uncertainty rippled through a variety of financial markets and caused disruption. arising out of concerns about banks ’ exposures to risky assets, counterparty risk heightened and problems began to spill over to the interbank market – where banks borrow from and lend to each other. as a result, there was increased uncertainty in key markets where banks traditionally raised funds. disruption to funding markets is particularly problematic for all banks since they regularly need to renew portions of their funding. the bout of turbulence in international financial markets has persisted for longer than many commentators would have predicted. since mid - 2007, there remain ongoing tensions in international financial markets amid a steady flow of negative news. through late - 2007 and into 2008, central banks – including the ecb – have continued to provide funds to promote a smoother functioning of the interbank money market. however, the cost of term borrowing for banks in this market has remained high. in addition, other longer - term bank funding markets remain relatively closed, as banks continue to be reluctant to lend to one another other than for short maturities, while many asset - backed securities, leveraged loan and structured credit markets are virtually inactive. term premia are expected to remain elevated for some time because of wider problems in the financial system such as uncertainties regarding the valuation of complex products, counterparty mistrust and continuing uncertainty about the ultimate location of mounting losses on assets