The Central Bank has warned of the threat that the rising level of debt in Irish society poses to financial stability.
While the banking system is in what the report describes as "a good state of health" and able to cope with adverse developments in the short to medium term, it pointed out that the main vulnerability to financial stability in Ireland is the increasing level of credit growth and indebtedness.
Mortgage credit now accounts for an estimated 80 per cent of outstanding household indebtedness.
"The Irish banking system is currently in a good state of health. Our central expectation is that this leaves it reasonably well placed to withstand pressures," Central Bank Governor John Hurley said.
"Despite this benign conclusion, we still have to consider a variety of risks. The main vulnerability here is the high and growing level of indebtedness. This poses dangers because, notwithstanding current robust economic growth in Ireland, there are domestic and external risks to the economic outlook. This increased debt burden will still have to be serviced should these risks be realised."
However, the situation is expected to improve over the coming years, with slowing house price increases and lower new house construction levels contributing to a slowdown in mortgage credit growth.
The outlook for the economy is also broadly favourable, with economic growth close to its medium-term potential of 4½ to 5 per cent.
The bank anticipates that any financial shocks will come from abroad rather than within the Irish economy, generated by volatile oil prices or exchange rates - but could have an impact on employment and growth in Ireland.