Mr. Sean Farrell:

I wish to pick up on the points introduced by Mr. Cunningham. Bank of Ireland approved €620 million for the sector last year, which represented an increase of 19% on the previous year. During that time approval rates within the bank continued to rise and the bank is currently approving 94% of agri-credit applications presented to us.

The importance of agriculture to Bank of Ireland is particularly evident in the branches located in smaller towns which rely most heavily on the agricultural economy. Within those branches agricultural-related lending typically represents more than 60% of all the business lending.

Looking towards the marketplace, land purchase, farm development and annual seasonal loan requirements are the areas where our customers are typically looking for financial support at this time. We have seen an increase in farm building and farm development requests from the dairy sector over the past 12 months. We anticipate this trend will continue in line with milk quota abolition later this year.

As Mr. Cunningham outlined, Bank of Ireland recently partnered with Teagasc to sponsor a research report which identified a dairy sector investment requirement of €1.5 billion to achieve Food Harvest 2020 targets. Aligned to this research that we funded with Teagasc, Bank of Ireland anticipates significant investment in the dairy sector post milk quota abolition. To this end we have put in place a €1 billion investment fund to support dairy expansion at farm level.

Based on the analysis of the research, Irish dairy farmers have low debt levels relative to our European counterparts and have lower average costs of production, which in our view position the sector very well to increase output and to compete on the international export market. For example, average debt levels on all farms holding debt in Ireland are approximately €24,000; on all dairy farms €62,000; and on those dairy farms with borrowings €94,000. Those figures are significantly lower than our European counterparts.

On volatility management, our view is that the outlook for agricultural commodities is positive and that prices will continue to increase over the next five to ten years, but that this increase will not be linear, and there will be peaks and troughs as was experienced between 2009 and 2014. Bank of Ireland has developed a suite of products, marketed as AgriFlex, which takes this volatility into consideration and allows customer to revert to interest-only repayments on their borrowings with Bank of Ireland during a time of reduced incomes.

On 2015 and the potential impact of reduced milk prices, to date there have been few enough requests over and above what we would normally receive from additional customers. The requests received to date have not typically been milk price-related but are more as a result of super levy issues. However, we anticipate that requests for cash-flow support will grow as the year progresses and we have plans in place to meet these requests.

Our farmer overdraft utilisation levels remain very low with 2014 having been a very strong year in this regard. Similar to how we supported our farming customers in 2009 and previously when farm-gate prices fell significantly, we will support them as necessary and AgriFlex is just one of the ways we can offer this support.

I trust this gives an overview of our current activity, future plans and our ability to support our customers through commodity price volatility. I look forward to answering any queries members of the committee may have.