Professor Eamonn Walsh:

Again, I had a very short period of time in which to prepare my statement for today. These financial statements date back to about seven or eight years ago. Unfortunately, it would be quite difficult for me at this stage to recall specific reporting practices. If I were to say in general, one of the difficulties is that, in the absence of disclosure, it means that one just reports a number like that for loans and receivables. We have loans and receivables of €50 billion and that is all of the information one receives in the annual report. It would clearly be very helpful if one said, "We have €50 billion of loans and receivables, €48 billion of which is speculative development lending." To an investor, if he or she were to receive that information, he or she would immediately know that this was quite a risky loan book and chances were that the income might not persist in the future for this particular financial institution.

Post-2007, disclosures were made. One of the problems with international financial reporting standards more generally is that they are designed for general purpose use. It means that the requirements for credit disclosures are not very well specified or articulated; the Senator can imagine, therefore, how disclosure could be quite difficult. Let us consider examples. Suppose a bank lends money to a retailer and that retailer is going to use the proceeds of the loan to purchase some development land, seeks rezoning of that land and then extends the retail store onto that land if the rezoning is successful. The question is: is that a loan to a retailer or is it a loan for speculative property development? One of the difficulties with the disclosures is that it is possible that somebody might look at this in the cold light of day and make a determination that this was a loan to a retailer rather than a loan for speculative property development. One of the difficulties with disclosure is that the absence of specific guidance means that it is possible that in that situation, there would be some judgment involved in determining whether it was a retail loan or a speculative development loan.