Mr. David Doyle:

After the guarantee there was a lot of concern about the situation of the banks as the property market continued to decline. There was more and more concern in the international market about the real position of the banks. They were regarded as having a lot of deadweight loans, which was dragging them down. The Minister decided to bring in Dr. Bacon to look at the options. The two principal options that were identified was, one, an insurance-based approach where you would write out an insurance policy, charge the banks an appropriate fee, let them work out the facility over the following ten years, say, and at the end of that period, if there was a deficit on the loan portfolio, it would be made good by the policy, for which they would have paid a significant premium. And the understanding on that particular option was that if there was a deficit from that arrangement, there would be a levy on the bank in subsequent years. However, the analysis that was done was concerned that that approach would still leave the market very uncertain about what, in reality, was going to emerge. So, the recommendation was that the cleanest thing to do was to take the loans off the banks for a discount and take it off their balance sheets, remove the doubt about their underlying financial position. They were the two main options, Senator.