Mr. Mark Cassidy:

The work involves creating various macroeconomic scenarios, including a key scenario for the future homebuilding requirements of the economy. Everybody understands that there is a long-standing problem with supply, which partly reflects the legacy of the crisis. The number of houses being supplied is perhaps half our long-term requirements. There are many issues outside the control of the Central Bank. Many measures have been taken in respect of housing supply which we in the bank regard as the key challenge relating to the housing sector.

There is an issue in respect of the banking sector's capacity to finance economic development and homebuilding. The Economic and Social Research Institute, ESRI, produced an analysis of this earlier this week. Our analysis is under way. We have produced macroeconomic scenarios in financial stability and with our colleagues on the economic modelling side and those on Mr. Sibley's side we are analysing the impact on the banking sector. A well capitalised banking sector is essential to ensure the sufficient supply of credit to the real economy. This is why we are concerned with the capitalisation and viability of the banking sector, for the flow of funds to consumers, borrowers and the housebuilding sector.

The ESRI study finds, and we agree, that there are additional channels to channelling the deposits of Irish citizens which can become limited in respect of the needs of the economy. These additional possible sources of funding include the issuance of covered bonds and the possible entry of foreign banks into the Irish retail sector. These are important because these foreign banks generally have access to stable medium to long-term funding through their parent bank and are therefore not reliant on the domestic deposits. Without labouring the point, the issue of new entry underlines the importance of the open and competitive market alongside very strong prudential management. We need to avoid a situation where as the economy develops new competition leads to excessively risky spending.