Professor Patrick Honohan:

I am broadly satisfied with the way the stress test has been designed, but I will not be drawn on whether banks will pass.

On the question of whether the banks have been adjusting their behaviour in order to pass, my impression is that they have not. In other countries there has been this element. In some of them big banks have been stating they must ensure they pass the stress tests and should go slow in lending and adjust their international portfolios. Banks here have been going through an adjustment of their portfolios since before the troika arrived. There have been massive sales, downsizing, deleveraging and so on and it is on these that they have focused their attention. I do not see their decisions on new lending and particular designs of loan restructuring as having been a major consideration. One might read in an English newspaper that this issue is affecting English banks and wonder whether that is happening here, but our banks have been focusing on their problems independently of the stress tests and do not believe they are the issue.

The Deputy asked specifically about cases of positive equity. I am as concerned as he is about such cases. The best sustainable solution for a borrower who wants to stay in a property is to continue in it. I do not like to see situations where it is being turned into a forced sale unnecessarily. There are complications because we never hear the full story, only about the highlights. I have a concern in that regard. If any bank thinks it will flatter its balance sheet by such actions, it should be very careful-----