Mr. Michael Torpey:

Thank you, Mr. Chairman. I welcome the opportunity to assist the inquiry and I will be pleased to address any questions the committee may wish to ask pertaining to your remit. My background is that I have spent my career to date working in financial services in Ireland with a particular focus on capital markets and treasury activities. Immediately prior to my role as finance director at Ulster Bank Group, I spent three years as director with responsibility for finance and treasury at First Active plc, the former First National Building Society, which had converted to plc and floated on the Stock Exchange in 1998. I was appointed finance director of the Ulster Bank Group in January 2004, following the acquisition of First Active plc by the Ulster Bank Group on behalf of Royal Bank of Scotland. I remained in this position until December 2007. And this move to Ulster Bank represented a move from the position of finance director of a publicly quoted company to a reporting line internally in the RBS group, to the group finance director in what was a very much larger multinational organisation.

My specific responsibilities in my capacity as finance director of Ulster Bank included the integration of the First Active and Ulster Bank Group financial accounting systems onto the RBS Group accounting platform; decision support to all of the business areas of the Ulster Bank Group in matters of finance; review of group accounting policies and practices; and assessing and ensuring compliance with regulatory requirements. I was chairman of the Ulster Bank Group tax policy and controls committee, the group assets and liabilities committee, the group reconciliations committee and the finance supervisory committee.

My brief included responsibility for statutory and regulatory reporting as well as financial controls and reconciliations for so long as the financial accounting systems resided in Ulster Bank Group. A major element of my role while in the Ulster Bank Group was delivery of a hugely complex integration of the financial accounting systems of both First Active and Ulster Bank onto the RBS group financial accounting systems.

With differing regulatory, legal, taxation and even currency regimes, this was an extraordinarily complex project, which had to be delivered while maintaining continuity of accounting reporting and, indeed, controls in Ulster Bank Group throughout the period.

Following completion of the migration project, production of statutory and regulatory accounts, along with the principal accounting services for the Ulster Bank Group, moved to the RBS Group accounting function in Scotland. As a wholly owned subsidiary of RBS, the role of finance director, as indicated, was much more specialised than might have been encountered in a stand-alone company or, indeed, than I had experienced at First Active plc. It was, effectively, a divisional management position within the RBS finance function with additional responsibility, including in relation to statutory accounts and regulatory reporting. Following completion of the integration project and the move of the principal accounting services to Scotland, the role was further narrowed, becoming a role heavily focused on the hugely important business support and financial controls, as well as reporting to, and very close engagement with, RBS Group finance. In practical terms, the role can be represented as a specialised accounting role at that stage.

I reported to the CEO of Ulster Bank Group and, in parallel, to the RBS Group finance director. And this latter relationship reflected that, in large part, my responsibilities were carried out under RBS Group strategy, policies, and often under direct influence and control. I had little involvement in operational matters in the business which did not directly involve delivery by the finance function. The Ulster Bank finance function had no involvement, for example, in credit policy and strategy and was not represented on the group risk credit policy and strategy committee, which was responsible for maintaining asset quality, determining policy, and ensuring adequate controls within the parameters of the RBS policy framework.

Central to this operating structure is the functional nature of the RBS Group organisational structure. RBS Group operates as an integrated group requiring that control, policy and process and so forth are driven and controlled from the centre. A particularly significant instance of this was that, from the outset, RBS Group treasury assumed responsibility for, among other things, treasury and balance sheet management functions and undertook to meet the capital and funding needs of Ulster Bank Group directly. I had proposed the retention of baseline treasury capability in Ulster Bank Group from the outset but this was not in keeping with RBS policy and was not accepted. From Ulster Bank's perspective then, capital funding requirements and balance sheet metrics were viewed in the context of the overall RBS Group situation rather than from a stand-alone perspective. Ulster Bank was a small part of the RBS Group and in Ulster Bank we had limited influence on, or control responsibility for, the RBS Group balance sheet management. This approach by RBS Group certainly had cost and scale benefits and had the effect for the group of enabling divisions to focus on business delivery while the RBS Group centre delivered the structural supports, such as the funding capital and balance sheet management. These structural requirements would, of course be ... form an integral part of management in a stand-alone entity.

I mention these matters, Chairman, to clarify my role and reporting relationships, as they operated within the RBS policy framework, and to provide the committee with some insight into my role within a wholly owned subsidiary. That said, I clearly recognise and accept that, as a member of the boards of Ulster Bank Group and as a member of the RBS finance board - that being a committee of the finance directors of RBS divisions and senior finance personnel from RBS Group centre, which was chaired by the RBS Group finance director - I have responsibility for my part in developments within Ulster Bank Group between 2004 and 2007 and any impacts that these developments had on the banking sector generally. I very much regret that, like so many others, I did not foresee, during my time in Ulster Bank Group, the extent of the difficulties arising within the RBS Group, the extent or duration of the turbulence in wholesale funding markets, the collapse of the property market in Ireland and, indeed, the resulting difficulties for Ulster Bank Group and the impacts on people and the population as a whole. I dearly wish that we could have known that even ... then even a small part of what we now know so that we might have been able to pursue a different course. I'm happy, Chairman, to address any questions the committee wish to ask within the context of the inquiry.