of the domestic financial system throughout this shock. more broadly, while market attention has focussed on banks in recent months, potential vulnerabilities in the non - bank sector have not gone away. liquidity mismatches, leverage and interconnectedness are key potential sources of vulnerability in non - bank financial intermediaries. the 2022 uk gilt market episode was a prominent example of the speed with which risks can crystallise in this sector. further progress is needed at a global level to strengthen resilience of non - bank financial intermediation. 1 / 3 bis - central bankers'speeches monetary policy is transmitting to the global real economy. in practice, this means higher borrowing costs for governments, households and businesses, tighter credit conditions for those looking to borrow, increasing rates on bank deposits, and ultimately some slowdown in economic activity so as to bring inflation back to target. domestically, despite the range of global risks i set out earlier, the irish economy has continued to surprise with its resilience. our domestic growth forecasts have improved relative to late last year, although of course we must remain mindful of the range of adverse outcomes that may materialise, as inflation continues to erode real incomes and businesses continue to face challenges related to high costs. rising interest rates have already had immediate effects in the commercial real estate market, and appear to be slowing the housing market in recent months. households and businesses are front and centre in our financial stability assessment. undoubtedly, many are experiencing challenges with the increase in the cost of living. however, at the system - wide level, lower levels of indebtedness, continued household income growth and robust employment remain a key source of strength. they are supporting mortgage repayment capacity, and are of course a key determinant of the revenues of local businesses. our assessment is that, if the economy continues to evolve in line with our expectations, we are likely to see only modest increases in financial stress among domestic borrowers, despite clear challenges for some groups of borrowers. turning to the domestic banks, higher levels of bank profitability are likely to continue under our central assumptions. of course there are tail risks that we must continue to factor in and be ready to address. however, the banking system has ample headroom above regulatory requirements in both capital and liquidity, with very high levels of cash reserves. all of these support the resilience of the sector. under this central outlook, we are therefore continuing - as

gabriel makhlouf : opening remarks to the international operational risk working group opening remarks by mr gabriel makhlouf, governor of the central bank of ireland, to the international operational risk working group, virtual conference hosted by the central bank of ireland, 18 may 2021. * * * welcome to dublin and the central bank of ireland. over the past decade, we have been witnessing significant changes to the risks our respective institutions confront. in many cases our mandates have expanded since the global financial crisis, complicated by the need to effectively process and analyse big data, often now at higher frequency intervals, and compounded by the phased migration from legacy to new technologies. the cyber and information security risks are evolving, and hybrid threats can arise as these overlay with physical security and data protection risks. in his book, against the gods, the remarkable story of risk, peter bernstein notes that “ the essence of risk management lies in maximizing the areas where we have some control over the outcome while minimising the areas where we have absolutely no control over the outcome and linkage between effect and cause is hidden from us. ” traditionally our respective institutions have predominantly focused on financial risk, but rebalancing over the past decade to strengthen nonfinancial risk management. however, over time, the lines between financial and non - financial risk have started – and will continue – to blur. this is apparent when one considers recent targeted cyber - attacks on critical infrastructure ( very timely in ireland this week ), the opportunities and risks presented by financial innovation driven by technological change, not least potential developments on central bank digital currency, and our learning from the recent response to the pandemic. and of course our shared risk and the necessity for collective action to address climate change as well as our collective efforts in support of sustainable finance. we believe in the importance of an independent central bank that is transparent, accountable and connected across all public policy domains, in ireland, in europe and across the world. we embrace diversity and inclusion as they strengthen us, as individuals and as an organisation. it is important that we foster a cultural foundation that supports implicit risk management, to avoid groupthink, while also implementing proportionate risk management frameworks, embedded to provide a systematic approach to explicit risk management that creates organisational value. effective operational risk management is a core enabler to the achievement of our vision to be trusted by the public, respected by our peers, and a fulfilling workplace for our people. it is a