in emerging asia contributes to flush the us financial markets with liquidity, making the exit more complicated, once it gets under way. to sum up, an untimely exit by the countries that are ahead in the cyclical upturn creates distortions and encourages other countries to delay their exit, thus further adding to the imbalances and making the exit more difficult for everybody. why is this happening? there might be three reasons. the first reason is philosophical. and i would formulate it as a question : why should emerging asian countries abide by principles different from those which some advanced economies and international institutions are advocating? i have in mind in particular the first principle established by the imf in the g20 exit strategy document i mentioned previously. i quote it : “ the timing of exit from stimulus should depend on the state of the economy and the financial system, and should err on the side of further supporting demand and financial repair. ” in other words, why should emerging asian countries exit in a timely way when international institutions, and some advanced economies, are generally advising to “ err on the side of being late ”? in my view, the “ err on the side of being late ” paradigm is potentially as dangerous as the “ productivity growth ” paradigm of the late 1990s and the “ fear of deflation ” paradigm of the early 2000s, which led some advanced economies to implement policy stimuli for too long, sowing the seeds of the subsequent crisis. not enough effort has been put into assessing all the risks of the too - early and too - late errors that policy - makers can make in implementing the exit strategy. analysts are often inclined to believe that the costs of exiting too early are pretty obvious, while those of exiting too late are unclear and can be attenuated over time. as a result, the costs of a premature exit are regarded as being much higher than those of a tardy exit. this leads to the asymmetric recommendation of erring on the side of being late. the historical examples chosen to illustrate the two risks tend to be analysed in a rather simplistic way, in particular concerning a premature exit, which is generally deemed to be the most dramatic. in fact, it is not so easy to find cases of too early exits. for instance, the monetary and fiscal policy tightening which took place in japan in 1997 has been considered by some as a case of premature exit, responsible for the japanese recession of 1998 - 99. however,

ireland, which is expected to be negative, and the relocation of financial services firms and activities from london to dublin. through our economic analysis and stress testing at a systemic level, we continue to assess and try to mitigate the negative economic risks arising from brexit. we recognise that affected firms, their customers, and the regulatory community face considerable uncertainty. we are seeking to limit regulatory uncertainty through a clear articulation of our approach and expectations of regulated firms and ( in collaboration with our european colleagues ) striving hard through the various european institutional mechanisms to minimise the instances of regulatory differences ( and hence arbitrage risks ) both across countries and sectors. by ensuring that firms providing financial services activities in the eu do so on the basis of the same regulatory standards and requirements wherever they are located, firms can make decisions based on other factors. such considerations will most likely include the legal system, infrastructure, availability of skilled workers and taxation. nonetheless, it is clear that brexit will alter the financial services landscape and its impact will be across the industry, both directly and indirectly. over recent months, we have received a large number of enquiries from uk - based financial groups and firms thinking about potentially setting up a subsidiary or expanding an existing entity to maintain their presence in the eu after brexit. we have had many discussions with such firms to explain how the central bank approaches regulation and supervision and to discuss their plans to deal with the significant challenges presented by brexit. the central bank expects to see a meaningful increase in applications for authorisation or for extensions of existing business. we have already received a number of applications and are reallocating existing staff and recruiting new staff to deal with brexit - related applications as a priority. financial innovation turning now to my final topic : financial innovation. while i have noted that banking in ireland has been subject to significant changes in recent years, it is also fair to say that the business of banking has not changed that materially. the domestic banking system is more concentrated both as a whole and with regard to the business models of individual banks. digital channels are being better exploited but the industry has not been substantially disrupted by technology to date. similarly, we have seen change in the business models of international banks ( and this may be accelerated as a result of brexit ) but fundamental business models remain largely unchanged. i do not think this will last. last year, i spoke at the financial services ireland ( fsi ) on the