Professor Alan Ahearne:

It was a live issue. I mean, I had many conversations with the Minister during the summer of 2010 on the issue of senior bonds, particularly in Anglo because ... now there was no intention of doing anything while the guarantee was in place but the guarantee was going to run out in end-September. And then some bonds in Anglo and some of the other banks would there ... were therefore going to be exposed, they would no longer be guaranteed. So we talked about what could be done with those banks and whether there was room, scope for bail-in or burning those bonds as people say.

I mean, initially I think the Minister wasn’t particularly enthusiastic, he saw lots of problems with that and there were problems, market problems, legal problems, and he saw all those. But as time went on during the summer he sort of came to the position, came around to the position that in principle this would be a good idea. I mean, at one stage I remember, maybe in August or September, he even came up with some numbers. He was talking about senior unguaranteed bonds after the guarantee had gone, those bondholders taking a haircut as he put it of 50%. I mean, I remember a conversation when he begun with the line “The bondholders are going to have to take a haircut.” He had numbers – 50% for the Anglo, he had smaller haircuts for AIB, 20% or something like that, and then with Bank of Ireland at one stage he mentioned maybe 5% then he said, “Then it’s probably not worth doing it.” So we’d exclude that bank. So the focus was really on Anglo. INBS didn’t have many bonds but that was probably thrown in there as well.

I went to the Washington DC with him, because you mention the IMF, in early October and I met with a couple of IMF officials, I think one of whom you’re meeting tomorrow. And they brought up ... we had some discussion with the Irish and they brought up, they said “Is the Minister aware that there’s about €4 billion of Anglo bonds that are now unguaranteed, senior non-guaranteed?” I said he is aware of that and he was aware of that. They said “It’s a lot of money”, and I said “He’s aware of that.” So it was clear from the short discussion I had with them at that stage that they had spotted this and they had these concerns.