Mr. Mike Aynsley:

There was nothing untoward in any way about the approach to Mr. Paddy McKillen to advise him of the board’s decision. We were going through a process, of which Mr. McKillen and the Barclay brothers’ representatives were aware, which culminated in a submission to the board and its approval of the maintenance of a process of consensual restructuring of Mr. McKillen’s loans rather than the sale of a portion of these to the Barclay brothers. When we came out of those meetings, my colleague Mr. Richard Woodhouse was given the authority to contact the Barclay brothers to inform them of the decision. I attempted to call Mr. McKillen but, of course, could not get hold of him. He does not do e-mail so I sent him a text. It was as simple as that. The reminder to him, following it up, was simply that this was a board decision and that it was a bank-client relationship that should not be divulged, as we were aware at the time that he was in litigation with the Barclay brothers. It was inappropriate, we felt, that he went to the press with that. Of course, it ultimately came out during the discovery process in that litigation. That is all there was to it.

It is very important that the Deputy is confident that this bank is operating in a different way from the old management of the bank before nationalisation. The key point is that there is no one individual in the organisation who has the capacity to influence or make decisions on any of these loans. We have a very well-structured governance process. It starts off with an account management team that is responsible for analysis, monitoring and oversight of the relationship every day to ensure the organisation has all the information that is required. That in turn is overseen by a client relationship manager for each one of these accounts. In the case of Mr. McKillen, Mr. Woodhouse is operating as his client relationship manager. We have a series of asset quality forums that examine these accounts on an ongoing basis, assessing the appropriateness of the various impairment levels or the performing loan portfolio, although it is a small one given what has happened to the bank. Decisions are processed up through a group credit committee that has representatives from the business, independent and risk management oversight units of the bank. There are two main operating committees in the bank - the transaction review committee and the investment product committee - which deal with the sale or holding of loans, equity participation or investment or divestment decisions, wealth management business and the protection of investor interests. These committees have various delegations that come down through the board. There are multiple people within the organisation that scrutinise every aspect of the loan decisions. For loans above certain levels, as in the case in question, there is a requirement to take these facilities in detail to the board to seek main board approval.