The State's financial institutions are playing down Central Bank concerns about the quality of their lending and stress they continually review their policies to take account of changing economic circumstances.

A spokesman for AIB, said it was very happy with its loan book. "We constantly upgrade our policies and provisions in the light of changes in economic circumstances. It has always been our policy to take a prudent and balanced approach to lending and we are very happy with our own book at the moment."

Bank of Ireland has also reaffirmed its cautious stance on lending and said it shares the Central Bank's concerns at this time.

A spokesman said it applied stress tests when extending loans to customers to appraise whether they would be able to repay those loans if interest rates increased rapidly and pushed repayments higher. "Stress testing is built into all of our lending and we are in agreement with the Central Bank's concerns that lending should be sustainable," he added.

The Central Bank's latest concerns come at a time when the Director of Consumer Affairs, Ms Carmel Foley, is backing an advertising campaign to warn consumers about the dangers of excessive credit card spending.

The Central Bank regularly corresponds with the financial institutions raising issues of concern and seeking confirmation that they are not undertaking excessive risk.

For all the Central Bank's concerns, analysts generally are not overly exercised about the asset quality of the banks. In a recent report, Davy Stockbrokers said fears about asset quality were overstated and that it did not believe this would deteriorate materially in the years ahead.