Mr. Richie Boucher:

A question was asked about our loan loss provisions. Our provisions are made on an international financial reporting standards, IFRS, accounting basis. What gives us comfort and substance to our belief is that we look at the diversification of the Bank of Ireland portfolio, the different geographies in which we operate and the mix of our loan books, all of which I hope are helpfully set out for the committee on the slide we provided. We look at the different mixes and diversifications. Then we look at our assumptions - is the number of customers who are defaulting increasing or starting to slow down? Again, we have tried to demonstrate for the committee that the number of customers who are defaulting is reducing, as is, therefore, the size of the issue. Then, we consider the collateral. What are our assumptions behind the collateral? In the United Kingdom and Ireland, in particular, we see that the collateral values are stabilising. Our assumption for owner-occupier mortgages has a peak-to-trough difference of 55%, which seems to be a valid assumption. It is different in different parts of the country. Ours is a universal bank and we have loans throughout the country. We probably have a slightly different mix in certain more challenged sectors and areas and that is identified in our owner-occupier and buy-to-let arrears relative to the industry. For commercial real estate in Ireland, we assume a peak-to-trough fall in our base case of 67%. That is a heavy assumption.

How do we, as a board, satisfy ourselves on the issue of capital? We go through an internal strenuous process which we term an ICAAP process. It is an internal capital assessment which we share with the Central Bank. For our base case, we use the consensus economic assumptions regarding unemployment, collateral values, interest rates, etc. and do a five-year model on that basis.