Pearse Doherty (Donegal South West, Sinn Fein) | Oireachtas source

While I acknowledge completely that there is a difference between shadow banking and banking, the same argument made by Mr. Gilvarry in terms of the buffer could be applied to the capital of any bank where the capital is being eaten into and the bank takes riskier initiatives to build up its capital. That is a catch-22 system. Mr. Gilvarry also spoke about this being very low-risk and about German government bonds. Only 3% of the entire amount managed by these constant funds are government debt. That is the problem. Distinctions have been drawn in terms of the US model and there have been calls to converge with this model. With the constant model in the US, 80% of the funds are going into government-secured debt, which is completely different. We cannot compare apples and oranges.

Mr. Carrigan mentioned that this was low-risk and diversified. That is fine, but - correct me if I am wrong - if I invest €10 billion into one of these funds, under this constant net asset value model, I am guaranteed to get €10 billion back. The bank does not do that. While they have limited the risks in terms of how they are diversified, when the asset decreases in value there is absolutely no buffer. Not one cent is set aside to deal with the losses that would be incurred. With the best investors in the world, nobody predicted the collapse of 1998 and previous collapses. Therefore, shortfalls arise that have been made up by financial institutions in the past that do not set aside buffers for those scenarios. If we are just looking at it from a jobs perspective in respect of Ireland, I can understand why we would tell Europe to go and stuff itself, because we dominate the market in Europe, but this is a very dangerous and risky enterprise if we are not providing any type of capital buffer for any collapse in the constant net asset values of these funds. The two solutions put forward by Mr. Carrigan have also been put forward by the industry and seem to be supported by the Department. If the two solutions - the additional liquidity charge and basically refusing to allow anybody to withdraw money from the funds - were given effect, would that not cause a greater problem?