Mr. John Trethowan:

I will deal with the questions from the top of the list, and the first question I have listed is the one on the size of the loan book. I have been monitoring the loan books for the past two and half years, since April 2010, and I can comment on the general direction of lending. It has been downwards. Each half-year we ask the banks to do what is called a funds flow statement, which shows the starting balance of their loan books and the end balance at the end of the period, and it shows how much lending has been done, how many repayments have been received, what interest has been charged and what has been written off. It tracks all the movements in the book. Irish businesses are currently paying down debt much more quickly than the demand for lending is putting new money into the market. There is a clear reason for the decline in the loan books during the past two and half years. I cannot speak for the past ten years but I am sure someone will find those numbers for the Deputy.

On the ISME survey, all of the trade bodies and trade groups - ISME, Chambers Ireland, the SFA, the IFA and the hoteliers - have a vital role to play in the market. They keep the pressure on from the demand side and keep everyone honest. I have a different view on the ISME survey. My problem with it is that ISME surveys all of its members. It sent out 8,000-odd surveys and reported on the number it received back, which was about 800. The people who tend to reply to such surveys are people who have issues - people who have been on the wrong side of staff satisfaction surveys and so on - so the survey is skewed towards the negative. That is my issue with the survey. It does not reflect the number of people who were asked to respond; it only reflects those who responded, which skews it towards the negative side.

On the separation of new and restructured loans, that is one of the fundamental things we do in the Credit Review Office. We do it in some of the 55% of cases in which we can help to get credit for businesses. We do it for farms and also for small businesses. Farmers were encouraged in poorer times to engage in secondary enterprises and many of them went into building as a secondary enterprise, including farm buildings, for which there were grants available. In such cases, we often find that the farm is viable but the farmer has not collected the trade debt on the building. By separating the farm from the secondary enterprise, we are able to show that the business is viable as a farm and that we need to park the other debt and see, first, if the farm business can survive through this period and, second, if it can make some contribution towards paying off the debt. It is the same for small businesses.

There was a question about legacy loans. I would say that applies in half of the cases we see. We always ask for a statement of assets from the main promoter of the business, whether it be the sole owner or the principal director. Invariably, when we ask for a statement of assets, we are given a list of buy-to-let properties. We have a table which shows the value they were bought at, their current value, how much was borrowed against the properties, how much is due to be repaid and what rentals there are. Those were the reserves of the business during the Celtic tiger years, and instead of being released as a liquid source of cash, they are now fixed assets. They either break even or go underwater, and instead of providing cash for the business the servicing costs of the loans are pulling the business back. Therefore, they need to be parked and the core business needs to be examined.

Anglo Irish Bank is precluded from making new loans and Bank of Scotland (Ireland) has declared it is leaving Ireland. We get some applications in which the business is currently insolvent because of large property debts with, let us say, Bank of Scotland (Ireland). Certus is doing forgiveness of debts and the application we get would be to finance a deal to refinance the Bank of Scotland (Ireland) debt. It might be a tenth of what was borrowed. For a business with a balance sheet that shows it is insolvent with a level of debt on one side, if the debt is written down to a tenth of the amount, it is transformational for the business. It gives it a future. We are encouraging the active banks - the pillar banks and Ulster Bank - to refinance such loans.

In most cases we manage to get that done, but there is a reluctance on the part of all the banks to take on someone else's debt. That is an issue also.

On the cost of lending and the micro-enterprise fund, the cost of lending reflects the price banks are having to pay for the funds. Until the collapse of Lehman Brothers banks were merrily funding themselves on the money markets at reasonably cheap prices but that disappeared and has remained broken since 2008. If members read the newspapers they will see the advertisements for deposits, and they are well over 3%. That is what banks are paying currently for retail money. They must take that, absorb their own costs and then lend it out again.

The cost of funds is what it is because that is the market. In the applications and the appeals we see we always ask how much the bank is proposing to charge. Given the level of risk we see in some of the applications it is not unreasonable. The micro-enterprise fund is charging the premium because the level of risk it is taking is much higher than in traditional bank lending. I have to be fair to both the supply side and the demand side in my job and I must face reality. That is the position on the cost of funds. The market is dictating that rate. AIB is showing the cost of funds as a funding premium. That is an abnormal situation and hopefully in time, if markets return to normal, it will take that premium back up again.