Professor John McHale:

As the guarantee is not something we have discussed as a council, this is a personal view. I would be slow to get rid of the guarantee for the following reasons. From the banks' point of view, it certainly is extremely expensive and undermines their profitability. I acknowledge that we need to repair the banking system and bring banks back to profitability in order that they can play their proper role in the economy. On the other hand, as Mr. Smyth outlined, those revenues are having a very positive effect on the size of the Government deficit. However, the reason I would be slow to get rid of the guarantee - this relates, in particular, to the extent to which the banking system is not State-owned - is that there is likely to be an implicit guarantee in place. One thing we have learned from the crisis is that even when there is no explicit guarantee, it can be very difficult for the State not to ultimately take on the liabilities. This applies, in particular, to the banks that are not actually State-owned because in that case it really is just a transfer from one pocket to the other. However, for instance, in respect of the 85% of Bank of Ireland, if the State really is taking on those liabilities and ultimately providing an implicit guarantee for the bank, the bank should be charged for it. I stress this, however, that is a personal view.