The continuing growth of the economy has provided a positive operating environment for the Irish retail banking sector, a prerequisite for competitive and effective banking services. Broadly, the recovery in the sector is continuing as banks continue to repair their balance sheets. The sustainability of bank business models, however, remains the main strategic risk for some institutions and a focus of supervisory work.
Balance sheets continued to decline during the first half of 2017 and cost challenges remain a significant concern for bank operating models. Yields on the bonds issued by Irish banks have declined but remain at elevated levels compared with EU peers. At end-June 2017, the non-performing loans (NPLs) of Irish retail banks stood at € billion, equivalent to an NPL ratio of 16.1 percent.