Mr. Denis O'Connor:

Thank you, Chairman, and members of the inquiry team. I am pleased to be here today with my colleague, Aidan Walsh. We were the partners leading the PwC work on Project Atlas from late September 2008 until January 2009. I was the main point of contact with IFSRA and the Department of Finance during our assignment. We have been requested to provide evidence in two key lines of inquiry - the role of advisers in analysing the crisis and, two, the effectiveness of reviews of the bank loan books and capital adequacy.

By way of background, PwC were retained by the IFSRA on 18 September 2008. Mr. Walsh and I met the Financial Regulator on that day. Mr. Neary explained to us that he needed urgent assistance to look at the liquidity position and the credit quality of a number of Irish banks. He explained that he would need us to carry out our work in a short period of time. Following our meeting, we exchanged a proposed scope of work and an engagement letter.

We commenced our work on Anglo Irish Bank on the following day, 19 September. Over the following number of days, our engagement was extended to include Irish Life and Permanent and Irish Nationwide Building Society. The original focus of our work was mainly on liquidity, as some of the banks were losing significant amounts of deposits and running out of money. We attended part of a meeting at the NTMA on 28 September, where we discussed the findings of our work over the previous eight or nine days. This work was focused mainly on liquidity and the level of provisions that existed in the banks' management accounts at the end of August 2008. Following on that ... following on from that, we issued an e-mail summarising the information shared at that meeting.

Apart from two e-mails discussing the deposit outflows on 29 September and the deposit inflows on 30 September, we had no other meetings or contact with IFSRA, the Department of Finance or the NTMA from 28 September until 6 October. On that date, we met the Financial Regulator in his office to discuss the work we had performed on the top 20 borrowers within each bank. We had not been involved in any discussions around the guarantee or any alternative options being discussed at that time. Our reports on Atlas 1 were discussed for the first time on the second week of October.

Following a meeting with the regulator on 8 October 2008, the Atlas 1 exercise was extended to cover all six banks and to increase the sample of the top 20 loans to the top 50 loans and the top 25 land and development loans. This Atlas 2 was a significant exercise and involved placing a large team from PwC in each bank for approximately five weeks, with us reporting to the regulator on 17 November, approximately six weeks after the guarantee had been announced.

Our work involved us reviewing lots of loan files and interviewing senior management in each of the banks, with particular emphasis on lending and credit areas. The scope of our work did not include reviews of smaller developers or any element of actual mortgage lending. Our reports highlighted the very large exposures that the banks had to a small number of developers and the very high level of asset concentration in property. The top ten borrowers had loans of €17.7 billion with the six guaranteed banks and that was before any additional borrowings they had in Ulster Bank or Bank of Scotland Ireland.

The Atlas 2 reports also included, for illustrative purposes, a number of scenarios shown to impact on tier 1 capital of write-downs in various asset categories. Following discussions on the findings of Atlas 2, the regulator requested that we undertake more work on the top 75 land and development loans. We referred to this as Atlas 3. We were to engage a property valuer to assist us with this work and JLL were engaged in mid-November 2008. They were asked to focus on problem commercial real estate loans and to carry out a review of the bank's valuation of the underlying properties based on an actual medium-term view of potential future value. JLL reported their findings on 17 December 2008.

We have submitted statements to the inquiry team dealing with the nature and scope of the work we were asked to carry out. As the committee is aware, we are restricted by Central Bank legislation as to what we can say about certain confidential information that we received during our work. Subject to these constraints, I look forward to being as forthcoming as possible in answering any questions you may have. I will now hand you over to my colleague, Aidan Walsh.