Professor Alan Ahearne:

I mean, assuming that money ... the bank had to be recapitalised, otherwise the guarantee would have been called in and the bank would have lost access to ECB funding. The issue is how do you put a large amount of money in, let's say, €30 billion. One way to do it is to put cash in. I mean that was done through ... AIB and Bank of Ireland were recapitalised with cash from the National Pensions Reserve Fund. There wasn't enough cash. So, the Minister could, in theory, have asked the NTMA to go out and borrow cash, issued Government debt and whatever interest rate prevailed at the time - ten-year money might have been 5% or 6% - borrow that money and put the cash in. A much, much cheaper way of doing it was to, rather than put cash in, to give the bank, Anglo, Government debt and that, whether it was regular Government debt or promissory note, it is all IOUs. Because, that way, Anglo could then go to the Irish Central Bank, present that piece of paper and borrow money on the back of it. That meant essentially that ... so the debt was not being issued into the market. The interest rate that was being paid on the promissory note was being paid to Anglo but Anglo was part of the Irish State as just an internal transaction. Anglo was paying interest to the Irish Central Bank on its borrowings but the Irish Central Bank is part of the State. All this stuff is simply internal. The cost to the Irish State of that recapitalisation was, if you go through it and get down into the weeds, the cost was the cost of funds to the Irish Central Bank borrowing from the Eurosystem and that was extremely low - it is currently zero. So the point was, this allowed Ireland to recapitalise this bank but the burden, the annual burden - the interest rate which is what really matters - was going to be extremely low. And that was the advantage of the promissory note system.