is published today. 2 / 3 bis central bankers'speeches as a general rule, the running of budget surpluses during phases of strong economic performance is a precondition for the running of stabilising, counter - cyclical fiscal deficits in the event of a future downturn. if fiscal buffers are not built up, there is a risk of repeating the historical patterns by which economic downturns have been amplified by pro - cyclical fiscal austerity. there are three further reasons to set more ambitious fiscal targets in the current environment. first, it cannot be ruled out that the surge in corporation tax revenues may have some temporary elements, indicating that some part of these revenues should be categorised as a windfall. second, to the extent that the current low interest rate environment is not expected to persist indefinitely, a tighter non - interest budget balance offers protection against future increases in debt servicing costs. third, the legacy of high public and private debt levels mean that ireland is relatively more vulnerable to reversals compared to other countries with less - leveraged public and private balance sheets. in addition to striking the cyclically - appropriate fiscal balance, individual fiscal levers can contribute to macro - financial stabilisation, especially for a country in a monetary union. for instance, raising the vat rate on labour - intensive activities during upturns proxies the stabilising role of exchange rate appreciation, while raising taxes on investment and consumption during phases of strong growth substitutes for the cyclical role played by an interest rate hike in an independent monetary regime. symmetrically, these taxes can be cyclically lowered during a future downturn to provide similar support that would be provided by currency devaluation and interest rate reductions under an independent currency. conclusions in closing, my aim in these introductory remarks has been to describe the current agenda for macro - financial risk management. the current economic performance is very welcome – but it is important to be pro - active in mitigating pro - cyclical dynamics and building up buffers to limit the costs of future downturns. as i have outlined, both regulatory policies and fiscal policy have essential roles to play in macro - financial risk management. 3 / 3 bis central bankers'speeches

of the scale of potential losses and funding challenges. in terms of risk management, the transfer of credit risk and funding risk to the investment funds that buy loan portfolios constitutes a national reduction in macro - financial risk, given that the investors in these funds are primarily overseas. it is critical to stress, however, that the sale of such portfolios cannot – and does not – affect statutory consumer safeguards. the central bank applies itself equally to its twin mandate of safeguarding stability and protecting consumers. accordingly, the central bank is committed to ensuring that loan sales do not affect the consumer protection framework governing mortgages. in particular, loan owners must use a regulated credit servicing firm to manage the loans and these firms are subject to the same codes of conduct as banks and retail credit firms. in addition, we are currently reviewing the code of conduct on mortgage arrears ( ccma ), in order to ensure that it is appropriately designed to address current conduct risks in the handling of troubled mortgages, regardless of the identities of the loan owners. while that review is ongoing, it is worth noting the important role that the ccma and related safeguards have played to date in assisting borrowers in difficulty. to end - march this year, more than 117, 000 principal - dwelling house mortgage accounts have been restructured, with 86 percent meeting the terms of the restructured arrangement. in relation to ongoing supervision, the positive economic climate across europe has been accompanied by a gradual expansion in credit provision. especially during phases of credit growth, it is essential that supervisors insist that risk management and governance frameworks are appropriately designed and consistently implemented if credit and operational risks are to be contained. maintaining confidence in the management and governance standards of banks is essential for financial stability, given the intrinsic opacity of loan portfolios and the dominant role of non - equity investors ( senior and subordinated bond holders, wholesale investors, nonguaranteed large depositors ) in the funding of banks. accordingly, while shareholders ( private or public ) play a vital role in the governance of banks, the leveraged nature of banks means that the stability of the financial system requires that all banks adhere to high risk management and governance standards. fiscal policy over the cycle in line with the mandate of the central bank to provide analysis and comment to support national economic policy development, the governor writes an annual pre - budget advisory letter to the minister for finance. in this section, i explain the advice i offer in this year ’ s letter, which