Brian Cowen (Laois-Offaly, Fianna Fail)

The Financial Stability Report 2007 published last week by the Central Bank and Financial Services Authority of Ireland, CBFSAI, is a comprehensive and detailed assessment of the impact of international financial market conditions on the Irish financial services sector and on financial conditions in the economy generally. I welcome the CBFSAI's conclusion that the financial system is well placed to withstand any adverse economic and sectoral developments in the short to medium term. The report highlights that based on key indicators such as asset quality, profitability, solvency and liquidity the Irish banking system is strong and robust and is clear that domestic banks have no significant direct or indirect exposure to US sub-prime mortgages.

The Central Bank's report draws attention to a number of welcome improvements in the overall financial environment over the past year, in particular to the moderation in growth in house prices and private sector credit growth. The report also finds that underlying fundamentals of the residential property market continue to appear reasonably strong. It emphasises that the safeguarding of our international competitiveness is essential to securing the growth potential of our economy, particularly in the context of the expected moderation in the residential construction sector.

Effective and efficient financial regulation is a key element of overall financial stability in the context of international financial market developments. In Ireland, the Central Bank and Financial Services Authority of Ireland provides a highly effective financial regulatory and supervisory regime. This is central to the resilience and well-being of the sector, helping to maintain financial stability, ensuring effective prudential supervision and promoting the interests of consumers. The integrated structure we have adopted for the supervision of individual financial firms and the monitoring and maintaining of financial stability overall confers significant advantages in ensuring effective and timely co-ordination of these important functions.

The authority functions within the overall context of the Eurosystem and the European Central Bank whose operational framework has functioned well in response to recent financial market developments. My Department will continue to work closely with the Central Bank and Financial Services Authority of Ireland to oversee national financial stability planning arrangements in line with EU requirements.

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There is also a co-ordinated EU response to international financial market conditions. EU Finance Ministers have agreed on a set of common principles and a roadmap of further actions to enhance financial stability arrangements and the ability of authorities to respond to market developments. Ireland is of course participating fully in this work to ensure there is an effective EU-wide system to maintain financial stability taking into account the important cross-border linkages that now exist in EU financial markets.

In conclusion, I share the Central Bank's assessment that the Irish economy continues to support the stability of the financial system and that the Irish financial sector remains in good health.

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