years to address the weaknesses in structural, regulatory and supervisory arrangements that existed prior to the crisis. the fssa recognises the significant strengthening of irish financial system, the major structural changes that have taken place since the financial crisis and the implementation of a more proactive regulatory approach, concluding that “ the authorities have been effective and vigorous in strengthening prudential regulation and supervision, implementing the lessons of the crisis, and keeping up with developments in european and international good practice. ” in relation to the supervision of securities markets, the fssa also acknowledges the bank ’ s leading role in the analysis of collective investment activities, which is significant in view of the large scale and international interconnectedness of the irish investment funds sector. at the same time, the imf has also made a number of important recommendations to increase further the resilience of the irish financial sector and improve the effectiveness of the bank as a regulator. the bank has already started to work on these recommendations, in conjunction with other irish and european authorities. to take one example, the bank has recently formed a new internal advisory committee on the design of domestic macroprudential policy measures, including the borrower - based mortgage rules, the counter - cyclical capital buffer and the other systemically important significant institution ( osii ) buffer. in line with the imf ’ s recommendation to improve further the degree of public transparency in relation to our decision - making processes and our own ongoing commitment to provide evidence - based explanations for our policy measures, summary records of the meetings of this new macroprudential measures committee ( mmc ) will be published. stress tests an important element of the fsap was a stress test exercise for the banking system. the forward - looking assessment of the resilience of banks to various risk scenarios is a key tool in informing supervisory actions and financial stability policies. in fact, the bank has recently participated in three stress testing exercises : first, as part of the imf fsap ; second, as part of the wider bank stress tests across the european union, led by the european banking authority ( eba ) ; and third, the single supervisory mechanism ( ssm ) stress tests, which followed the eba methodology and ran concurrently with it. the bank also continues to review and challenge the banks ’ own stress testing approaches and outcomes. i will focus on the first two exercises, as the outcomes are now in the public domain. the bank ’ s analytical framework was used to support the imf f

##sap bank stress test. the fsap adverse scenario was not predictive but designed to assess the capacity of irish banks to withstand a severe but plausible scenario of a simultaneous downturn in the irish and uk economies, characterised by a fall in property prices and a widening of sovereign spreads that triggers increased funding costs for banks. the exercise confirmed that the risks within the bis central bankers ’ speeches banking sector are manageable at a system - wide level. unsurprisingly, it also highlighted that some vulnerabilities still exist as a consequence of the recent crisis. the eba stress test serves as a useful barometer to assess the health of the european banking sector and focuses on the largest banks operating in the european union. relative to other member countries, the irish banking system has experienced higher loan loss rates since 2008. since projected credit losses in the adverse scenario are calculated based on past experience, the capital depletion in the adverse scenario is inevitably more pronounced for irish institutions. stronger starting capital positions coupled with ongoing balance sheet repair has enabled european banks, including the irish banks, to withstand a more severe scenario than in the 2014 stress test exercise. as with the fsap stress test results, the primary message from the exercise is that the irish banks included in the eba sample ( aib and bank of ireland ) are adequately capitalised but remain vulnerable to a downturn, especially in relation to the continued workout of problem loans and the sustainability under stress of current profitability levels. the fsap, eba and ssm stress test results, together with additional supervisory stress testing work, are being combined with the full risk assessment for all in - scope banks to feed into the annual supervisory review and evaluation process ( srep ), which is used to determine capital requirements and capital guidance for banks. in addition, the stress tests and srep inform the risk mitigation programmes, which are focused on driving the banks to continue to reduce their risk profiles. as the ecb is now the competent authority for the supervision of irish banks, the focus of our joint work includes ensuring that banks make further progress in the workout of problem loans, have credible business strategies and risk management plans to increase resilience to deterioration in their operating environment, including any adverse consequences of brexit. brexit the short - and medium - term macroeconomic effects on ireland of brexit depend on several factors. most directly, a slowdown in uk output growth and a depreciation