for the greater part, these are matched by liabilities in the form of currency, bank deposits and government deposits. the excess of assets over liabilities is represented by capital and internal reserves. these totalled 2½ billion euro at end - 1999. this is the figure to which the term “ free reserves ” is applied. this is the capital which supports the bank. it is also a buffer against changes in the value of external reserves, arising from movements in the euro vis - a - vis other currencies. relative to the size of our balance sheet, this figure is at the lower end of the scale vis - a - vis other euro area national central banks. the national central banks in the eurosystem no longer conduct foreign exchange intervention. it is fair to ask, therefore, whether they now have surplus external assets. there is a recognition that this question should be addressed in due course. these reserves are subject to call by the european central bank. in all likelihood it will make a further call for additional capital and foreign reserves. it would seem preferable therefore that the issue of superfluous reserves be settled at the general european level rather than taking unilateral action. our external reserves are denominated, for the greater part in us dollars and to a much lesser extent in sterling and yen. there is also a small quantity of gold. the reserves are invested in deposits and securities and are managed by reference to an independent benchmark. the central bank has a very good record in managing large - scale funds. in respect of 1998 we earned a surplus of 225 million euro ( ir£177 million ), mainly from investment of reserves and interest. of this, 193 million euro was transferred to the exchequer. banknotes and coin to most people the euro probably remains largely academic until it is available in their pockets. it is still considered a currency in transition. in less than two years from now the new banknotes and coin will have begun to replace national currencies. the impact will be huge at local level ; immediately the euro will become the concern of everybody. may i remind you that the largest banknote will be 500 euro ( roughly £400 ) and the smallest coin will be one cent ( which is 4 / 5 of a penny ). there will be seven banknotes and eight coins. our production arrangements are already well in hand. in recent years we have invested more than £30 million in new plant and machinery. coin production is under way since last

the central bank and financial services authority of ireland is the institution charged with contributing to financial stability in ireland under both domestic and eu legislation. the organisation consists of two component entities – the central bank and the financial regulator – each with its own particular responsibilities. the roles are complementary and we enjoy the closest cooperation. the central bank ’ s responsibilities for financial stability relate to the surveillance of the strengths and vulnerabilities of the overall economy and financial system. the financial regulator ’ s remit includes surveillance of the financial soundness of individual institutions. both approaches are necessary for a comprehensive assessment of financial stability and our organisational structure facilitates the seamless sharing of expertise. accordingly, colleagues from both the central bank and the financial regulator come together regularly at all levels ( i. e., directors, senior management and staff ) to consider financial stability issues and this joint assessment is published in our annual financial stability reports. financial stability in ireland publication of the financial stability report is only one of a number of ways in which we contribute to financial stability on an ongoing basis. it is generally accepted that price stability contributes greatly to financial stability. as a member of the governing council of the european central bank, i participate in the formulation of eurosystem monetary policy. the irish central bank conducts market operations on behalf of the eurosystem relating to the provision of liquidity to banks in ireland ; we are responsible for the oversight of payments and settlements systems and we contribute to the formulation of the eurosystem ’ s policies on financial stability. we maintain an open dialogue with the domestic credit institutions in order to review issues affecting the domestic financial system and to facilitate the flow of information between our domestic banks and the ecb. this dialogue has been intensified in recent times through regular and ongoing joint meetings of central bank and financial regulator management with the senior executives of our major banks. furthermore, we continue to develop procedures to assess and deal with any concern of a financial stability nature that might arise. finally, as i have said, we work closely with our colleagues in the financial regulator, who in the course of their regulatory activities have important insights into the operation of the financial system. mr neary will share these insights with you shortly. financial stability report 2007 your invitation mentioned the financial stability report for 2007 specifically. i will outline briefly now the approach and key messages in this report and we are happy to explore any of these issues in greater detail afterwards. since 2000, we have published annually an assessment of financial stability. in similar fashion