The EU’s supervisory framework  Let me now come to the third and last element of my reflections this morning: the supervisory framework in Europe. Many issues are currently under consideration. I would like to focus on a dimension that is very relevant from a central banking perspective, namely macro-prudential supervision. Macro-prudential supervision of the financial system by central banks needs to be strengthened.
However, the rapid expansion in the balance sheets of the domestic banks also took the form of an expansion in lending to foreign speculative ventures, such that the scale of net inflows understated the growing exposures of Irish banks to a reversal in conditions. It follows that the Central Bank needs to be vigilant in understanding the international financial environment.