The Irish banking sector faces the challenge of "reconfiguring its business models" to focus on lending to the real economy, according to the central bank's latest macro-financial review, published today.

The review highlights the need for banks to "support the real economy with credit at sustainable rates", as well as secure their own long-term profitability.

"After nearly a decade of decline, Irish bank margins remain very narrow," the review said, and banks should seek a successful transition