Professor Philip Lane:

That is a great question. I completely agree with the Deputy that talk is cheap. Historically, not just here but in many places, central banks come out with reports and after the fact governors will mention that they mentioned that such a risk existed on page 57 of some report. For that to be credible in terms of our own policies if we think there is a material risk - and the Deputy used the term "material risk" earlier on - it should feed into our policies. One thing that happened on a pan-European basis after the crisis is that every country now has what is called a macroprudential policy. In Ireland we, as the Central Bank, have the lead role. In some other systems that lead role might be allocated to the finance ministry, but here it is allocated to us. One manifestation of that policy is the mortgage rules which we have talked about. If I believed the risk was zero, I would not be looking for deposits on houses or loan-to-income ceilings. That is one example. If the risks got more intense, we could recalibrate those measures.

Let me emphasise that every three months we also have to decide on what is called a countercyclical capital buffer. Much of the global effort says that as cyclical risk goes up, national central banks and national regulators should raise the capital requirement on banks. That is an option open to us and we can do it every three months. If one goes back to 2004, 2005 and 2006, there was a paralysis not just here but everywhere. People were recognising that something was going on but were saying that they would think about it and that they would perhaps delay acting. We now have a mechanism that allows us to move more quickly. This is something which we review every three months. Every three months we publish our assessment on our website. We decide whether we need to start raising this buffer, which will raise the amount of protection in the system. We can be held to account because we now have an extra policy instrument and we are committed to using it when we think it is necessary.

That covers our own policy. Let me come back to the situation more broadly. I have now told the Deputy that a lot of what is going on is not coming out of the domestic credit system, so it is outside of our direct regulatory control. For broader types of overheating, the responsibility will be on fiscal policy. I broadly believe that where the spring statement signalled the 2019 budget should be in terms of the overall balance may be okay for 2019 but, if these pressures continue to build up, seeking to run a significant surplus will be part of risk management. The risk management will partly be on us, but there is a heavy responsibility on fiscal policy for it to run on a prudential basis.