Mr. Joe Walsh:

I thank the committee for the invitation and the opportunity to make a short statement.

At the request of the then Minister for Finance, the late Deputy Brian Lenihan, I agreed to have my name included in a list of people who would be available to be appointed as public interest directors. I was appointed to the board of Bank of Ireland in January 2009. I have been a member of the board since then and a member of the nomination and governance committee. The committee oversaw the complete renewal of the board's non-executive directors, none of whose tenure at present pre-dates 2009. As a member of the committee, I contributed to the successful implementation of compliance with very substantial new governance codes, including the Central Bank of Ireland's corporate governance code for credit institutions and insurance undertakings which became effective from 1 January 2011; the revised version of the UK corporate governance code; the Irish corporate governance annex to the listing rules of the Irish Stock Exchange; and the Central Bank of Ireland's fitness and probity requirements.

Over that time 5,200 people in Bank of Ireland have been put through the required due diligence and assessment in accordance with these stringent fitness and probity requirements. As a public interest director I see it as my function to ensure continued monitoring of compliance with these standards.

The committee has presided over very significant change in the top echelons of the bank. Of the 61 people on the board, group executive and direct reports to the group executive, at 30 September 2008, 62% have left or will have left the group in the next couple of months and 28% are in new roles. All of the non-executive directors have left the group over that period as have five of the eight group executive team. We now have a new experienced board.

The Central Bank mandated a review of corporate governance at the Bank of Ireland by a major international firm in December 2010. It concluded:

The form of BoI governance complies with best practice guidelines. We have also found no evidence that there are any major weaknesses in terms of how governance is "lived" at BoI. Finally, when comparing Bol with benchmarks, we found its governance to be broadly in line with international banking peers, and Board effectiveness to be better.

The external review of board effectiveness in the fourth quarter of 2011 concluded that "Board performance exceeded benchmarks on 45 dimensions out of 50 including critical areas such as knowledge, challenge and dissent". In addition, the Bank of Ireland's restructuring plan has been agreed with the European Commission.

I have been a member of the group remuneration committee from January 2009 to date and became chairman of the remuneration committee in January 2012. During that period, the committee oversaw a major change in remuneration levels and employment structures in the Bank of Ireland. Taking into consideration the changes in remuneration and reductions through voluntary redundancy in staff numbers, wage costs to the bank have reduced by about a quarter in the past four years. There have been major changes to pay structures in terms of absolute salaries, variable pay and pension benefits. More than 4,500 fewer people are working with the group since January 2009.

The remuneration committee has ensured compliance with the very stringent provisions set out by the Minister of Finance, under the subscription agreement in 2009 and his subsequent letter of July 2011. The latter was disclosed as part of the documentation in connection with the bank's successful recapitalisation, primarily from the private sector, in 2011.

The remuneration committee led the revision of remuneration structures to ensure adequate reflection of risk in remuneration. Specifically, it ensured the necessary changes were made to ensure compliance with the European Banking Authority requirements, in so far as possible in circumstances where bonus variable pay is not permitted in the Bank of Ireland. This has included the identification of staff with particular influence on the risk profile of the group, the implementation of mandatory risk goals for all executives and managers, and the updating of the group remuneration policy to reflect the focus on risk.

The committee ensured appropriate public disclosures on remuneration in the annual report and accounts and Pillar 3. The Central Bank of Ireland reviewed the group's compliance versus the EBA guidelines in 2011. In addition, the Financial Services Authority reviewed the UK subsidiary's remuneration policy statement for 2011. The remuneration committee made significant revisions to group remuneration policy and required management to conduct significant upgrading of the group's database of information on employees' remuneration.

As a board member and public interest director whose career has spanned both the business and political spheres, I take a keen interest in how Bank of Ireland has met its stated strategy of supporting and benefitting from economic recovery in Ireland. With regard to lending, I shall deal with mortgages first. With an existing share of about 20% of the mortgage market, Bank of Ireland has provided about 40% of the new mortgages in the market in the year to date. The mortgage market has increased by 7% in the third quarter of 2012 compared to the same period in 2011. This was the first positive year on year growth since 2006 and the third quarter in a row to show an increase. According to the Irish Mortgage Council, approvals in the third quarter of 2012 are up 14% year on year supporting the bank's expectation that this improving trend will continue.

Bank of Ireland continues to demonstrate its commitment to the mortgage market. For example, a €1.5 billion mortgage fund was launched in December 2011 to support first-time buyers and movers purchasing a home during 2012. Due to the oversubscription of applications to the fund a new €2 billion mortgage fund was launched in October 2012 to cover the remainder of 2012 and 2013. Other initiatives include the bank's negative equity mortgages for both those trading up and those trading down which was launched in April 2012, participation in the NAMA deferred payment initiative and hosting the Bank of Ireland's home buyers' week in October 2012.

I shall now discuss mortgage arrears management. Bank of Ireland has mobilised significantly around the management of mortgage arrears. It is a large-scale programme that is well under way in the bank and supports our customers who are facing, or are in, financial difficulty with their mortgage repayments. In the past year we have significantly increased the number of staff involved in our mortgage arrears programme. We now have more than 700 staff across the group involved in the management of mortgage arrears. We have made considerable investment in the training of our staff which is supported by internationally recognised experts in the field of mortgage arrears management. We have the largest bank branch network in the country and we have trained mortgage adviser experts in each branch. We also have mobile advisers throughout the country who can meet customers in their homes or an alternative location to their branches.

We offer restructure options to between 400 and 500 customers every week and have added more long-term solutions to our products. We have formally restructured more than 16,000 mortgages and more than 86% of those customers whose mortgages have been formally restructured are meeting their contracted payments.

We also have a significant number of customers on informal arrangements with us.

Bank of Ireland business banking has achieved, and will exceed, its €3.5 billion SME lending target for 2012. This figure represents the bank's approvals for new and increased credit facilities for businesses and farmers. Credit approved for customers seeking restructured facilities are excluded from these figures as reported by Bank of Ireland.

The €3.5 billion represents a 16% increase in approvals in the year to date when compared with 2011, which is as a result of increased demand from several sectors in the Irish economy. There has been increased demand from customers in the health care, manufacturing and hospitality sectors, and lending to farmers has also remained strong. Increased demand for asset and commercial loan finance has also been a feature. Of particular importance is the fact that lending to businesses and farmers has increased in all regions throughout the country, underpinning Bank of Ireland's confidence in its nationwide branch network. Lending to Dublin businesses was up by 27% compared to last year. With more than 40% of businesses located in the capital the bank believes this indicates that confidence is returning, as evidenced by the growth we have been seeing in credit demand from viable businesses in the second half of the year.

Bank of Ireland has just completed its seventh national enterprise programme in which we organised 80 events and networking meetings that more than 5,000 businesses and farmers attended. Some 1,500 businesses also took the opportunity to showcase their products and services in Bank of Ireland branches. In 2013, the bank will roll out a series of free SME lending clinics which aim to explain the lending application process primarily to start-up and micro-sized businesses.

We have an increased lending target of €4 billion for next year and we are determined to achieve it.