Mr. Matthew Elderfield:

I thought this question might be posed. I will try to provide a short answer and then a more complicated one. The short answer is that the banks have plenty of capital right now. However, we know that in the future they are going to need more capital because of Basel III and matters of that nature. The questions are how soon they are going to require that extra capital, whether they can obtain it on their own and how much they will require.

I will comment first on why I believe they have plenty of capital now. On the previous occasion on which I commented publicly in respect of the banks, I stated that AIB has 19.9% capital, Bank of Ireland has 14.3% and Permanent TSB has 21.5%. The position may have moved since then and this will be shown in their published accounts. I did not have time to check the accounts. Those amounts are above 10.5% by a wide margin and are also above the EU minimum levels. The banks, therefore, have a buffer. We know, however, that this buffer will be eroded over time as losses occur. Then there are the international rules such as Basel III and the EU capital requirements directive IV - same difference - and these are going to institute tougher capital requirements over time. The banks have perhaps not a mountain to climb but they certainly have a hill to walk up in the context of capital.

The banks are already at the ratio levels at which they need to be and mostly they are also on equity. However, there are deductions which they must make. For example, they must take from their capital any tax losses they have accumulated. They have quite a number of such losses. That is the big, moving number and it will probably amount to approximately €6 billion over time, just from Basel III. It must be remembered, however, that there is a five-year phase-in period, so the banks have plenty of capital-----