Mr. Tom Considine:

I thank the Chairman for the opportunity to appear before the joint committee. At the request of the then Minister for Finance, the late 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 from that list to the board of the Bank of Ireland in January 2009.

As a board member I worked on the development of a strategy to stabilise the bank in order to safeguard the investment made by the taxpayer and to provide the public with an effective banking service.

As a board member I have contributed to the significant progress made by Bank of Ireland in reducing the risk exposure of the State and moving it ever closer to being able to fund its operations without State support. In September 2008, the State was guaranteeing €136 billion of liabilities for the bank under the exceptional eligible liabilities guarantee scheme, generally known as ELG. This amount was down to less than €26 billion in November 2012. In its trading update on 13 November 2012, the bank announced that it had prepared for and was ready for the expiry of the ELG scheme.

The bank has made significant progress in funding itself in the market without the support of the State guarantee. Let me give an example. Last week it raised €250 million in ten-year subordinated debt and last month it raised €1 billion in three-year asset-covered securities. Both issues received strong market support even though they were not supported by a State guarantee.

Bank of Ireland received a total cash injection of €4.8 billion from the Exchequer and is very grateful to the Government and the taxpayer for that support. The public interest directors and the board and management of the bank are making every effort to repay that money. Already the bank has made cash payments of €2.7 billion to the Exchequer. This is composed of guarantee fees of €1.3 billion, interest on the preference shares and on the contingent capital instrument of €500 million and €900 million in respect of warrants repurchased and recapitalisation fees. In addition, I am confident the remaining State holding of €2.8 billion of preference shares and contingent capital, which carry a coupon of circa 10% per annum plus the 15% of equity held by the State, will be profitable investments.

I have been a member of the board audit committee since January 2009. In that role I have taken a particular interest in ensuring the system of internal controls is fit for purpose and that the provision for bad and doubtful debts included in the accounts is well supported.

As a public interest director I was anxious to ensure that risk governance at Bank of Ireland would be developed to ensure as far as possible that taxpayer support would not be required in the future. In that context I was asked by the board to chair a group of non-executive directors to determine in the light of recent experience the most appropriate risk governance arrangements for the group and to recommend any necessary changes to the existing governance arrangements. That group was established in February 2009.

The work of that group had a strong public interest dimension because it was aimed at putting in place systems and structures that would avoid a repeat of the events that led to the taxpayer being called upon to support the bank. As chairman of this group, I worked to bring about significant enhancements to the way in which risk was managed in the group. The board readily accepted a recommendation that board-level engagement in risk oversight should be materially increased with particular attention being given to ensuring that risks were properly identified, assessed, controlled and managed and that strategy was informed by and aligned with the group's risk appetite.

To put these changes on a firm footing, the board agreed in July 2009 to establish a board risk committee of non-executive directors and to restructure the executive risk committees. To support the new risk structure, the board agreed to fund a programme of work designed to build up a uniform management information system across the Bank of Ireland group. As a result of these changes, the board of the bank is in a much stronger position to direct, control and monitor the business. As chairman of the board risk committee I played a key role in these developments.

The major enhancement initiatives identified in 2009 have now been implemented and the progress the group has made in enhancing risk management has been recognised by external advisers. In December 2010, Boston Consulting Group commented in its review commissioned in response to the Central Bank's risk mitigation programme that, "risk management at BoI is broadly aligned with peer best practice. There are no critical gaps and in some areas there is rapid improvement".

In April 2012, Promontory Financial Group commented that its review commissioned in response to the Central Bank's risks mitigation programme that:

...evidenced considerable strengths in the Group's risk governance framework reflecting a sustained focus from the Court in recent years. Following the crisis, the profile of risk within the Group has been greatly enhanced and the Court and the Executive team are clearly focused on risk issues which receive detailed attention.

The board, the board risk committee and management are continuing to develop the risk governance structure to keep pace with best practice in the market and with the changing macroeconomic environment.

I am happy to answer any questions from members.