. and after those remarks, my team and i will be happy to answer questions. it is important to note at the outset that the review does not aim to provide an economic 1 / 6 bis central bankers'speeches forecast, but instead focuses on the potential for negative outcomes to materialise. * * * risks to financial stability the irish economy is one of the most open economies in the world for trade and finance. being open creates significant benefits in terms of jobs, economic growth and exchequer revenues. but it also creates risks, particularly to developments outside of ireland. and, at the moment, many of the risks we are concerned with stem from abroad. the most obvious risk facing the irish economy and domestic financial system is the continued possibility of a disorderly brexit. although that risk has receded, it hasn ’ t gone away. and a disorderly brexit could lead to a lot of uncertainty, volatility and disruption if it were to materialise. much has been said already on this subject, so i won ’ t dwell further on it. other key risks we see on the horizon are abrupt shifts in international trading and tax arrangements. the small and highly globalised nature of the irish economy means ireland is highly integrated in global supply chains and relies significantly on investment by foreign multinational enterprises. a further escalation in global trade wars, combined with shifts in the international tax environment, could have material effects on ireland. therefore, the announcement by the minister for finance yesterday is a welcome development. it is important that ireland builds buffers to ensure the public finances are resilient to shocks, and the government has sufficient room to manoeuvre should any materialise. building buffers in the good times limits the costs of future downturns. another key source of risk i want to flag today is from developments in global markets. global financial conditions remain very accommodative. this has resulted in the continued buildup of debt levels around the world alongside a prolonged period of easing credit standards in parts of the global corporate debt market and increased risk - taking by the non - bank financial sector. what we are mainly concerned with here is the impact of a sudden reversal in risk appetite which could lead to sharp falls in asset prices, for example. but not all risks are from abroad. closer to home, new lending has continued to grow. new household credit is growing at the highest level in a decade, and we see the domestic banks increasing their lending to large businesses

. the domestic economy is also approaching full capacity and, in the absence of a disorderly brexit, we must also consider the risks from an overheating economy. * * * resilience in the financial system let me turn to resilience, and start with households and firms. here we see resilience continuing 2 / 6 bis central bankers'speeches to improve. debt service ratios for households continue to decline relative to incomes. the household sector interest burden is now lower than it has been at any time over the past 15 years. but vulnerabilities remain, not least for households who have defaulted in the past, or have had their loans restructured. these households are particularly vulnerable to shocks. looking at resilience in the banking sector, overall the domestic banking system is now better able to absorb shocks rather than amplify them. since 2014, non - performing loans ( npls ) have fallen by around 85 per cent, capital levels have substantially increased and funding costs, which are primarily deposit - based, are among the lowest in europe. however, profitability challenges over the short to medium term have become more acute. high costs, which are above the european average and almost a quarter higher than in 2015, continue to contribute to weaker profits. and a sustainable reduction in npls remains a priority as they are still above international averages. substantial investment is also required to strengthen operational resilience. we think about these issues holistically. a fundamental protection for consumers lies in ensuring the financial system is stable and the firms that operate within it are financially safe and sound. turning now to the non - bank sector, its size relative to the domestic economy is among the largest globally. while it has a predominantly international focus, irish - resident investment funds have become increasingly exposed to the domestic real estate market, accounting for a third of the estimated stock of investable commercial real estate. the resilience of non - bank financial entities to a widespread turnaround in market sentiment remains untested. * * * policy actions to safeguard financial stability we use a range of tools to promote financial stability in ireland. as regulator and supervisor, we monitor risks in the financial system and individual firms through our prudential work. we take action when unacceptable risks are identified and ensure firms build resilience. macroprudential policy, on the other hand, is fundamentally about financial stability for the system as a whole. and today i want to announce the outcome of a number