Mr. Cormac McCarthy:

Well starting in ... if you'll forgive the, it may take me a few minutes to explain this Senator so if you'll forgive me, feel free to interrupt me.

In 2004, we commenced a process of reporting exceptions to mortgage policy to the board, so this was the first time that the board members would have seen it so it was new news to them. A typical mortgage, a standard mortgage underwriting has a standard policy and there is typically exceptions allowed to that, so the core portfolio management limits, and we would have allowed exceptions of 10% for loan to value and 10% to debt service ratios. And what we did is in all the cases even though they were, if there was somebody looking to lend outside those particular limits that we had in place, it had to come into the centre. And in doing that we managed these exceptions so in the loan to values, it would not have been unusual for there to be a 10% variation or within a 10% variation. For example, a good chunk of those, as I understand it from my research, were very small changes in loan to value they weren't significant amounts, and on the debt service ratio, for example, if someone, 50% typically of those outside policies would have been for people with incomes of €75,000 and greater, so the greater your income the greater your debt service capacity so we had very clear policies on these but we had portfolio management exceptions that we allowed but they had to be underwritten centrally and then these were reported to the board.

As an aside it's interesting that even with the new rules that the regulator has in place there are exceptions allowed of anywhere between 10% to 20% as I understand it for loans to value and debt service ratios, so that accommodation has continued into the current environment. So what we were doing was, as was entirely appropriate, we were reporting these to the board. And having done the research and having presented to Professor Brennan and the board in 2004, as the minutes indicate she spent time with Mr. McDonnell outside the meeting and satisfied herself on the matter. And those reports would have gone to the board serially subsequent to that over the coming periods and the board minutes don't show until 2007 that there were concerns.

In 2007 as you rightly point out, the board again brought up the issue of outside policy and we agreed that we had exceeded loan-to-value policy in March 2007 in particular, again going back to my 10% limits, following which action was taken to deal with that and the records show that subsequent to that date, the LTVs outside policy and debt service ratios outside policy all declined further. So what we were doing was doing the right thing in reporting these to the board. We we were managing within portfolio management limits that exist to this day, and reporting them to the board, there was good debate and discussion at the board and to the best of my knowledge, the minutes reflect this, reflect this subsequently, the board was satisfied with the explanations it received from management.

With that said Senator, I accept that we let our standards slip in many ... in some occasions and I do regret that but we were managing within, you know, tried and tested and understood limits.