Professor Philip Lane:

That is the kind of number with which I am also familiar. However, going back to what I said earlier, the really big losses during the crisis were on development loans, which is such a troubled category. The banks cannot go back to having very high ratios of debt finance because developments take so long, from purchasing a site to planning and so on to the final sale of the housing, commercial outlets or whatever is being developed. That is an intrinsically risky prospect and my understanding is that the international norm, for example in a very developed financial system such as the US, is for maybe around 40% of the financing not to come from debt but from equity. This is a big cultural shift for the Irish development sector, and if that sector has not been making money for a number of years, how is that equity generated? In this situation it is important to have a better equity market so that small developers can raise equity financing, possibly through the entry of foreign investors into that market coming into Ireland with innovative schemes. Therefore, I agree that such an equity market, for development, needs to grow. Another way of saying this is that I would not be in favour of the banks overly relaxing their attitude to how much debt should go into a development project. The counterpart to that is that in the same way that at the European level the capital markets union project tries to improve equity financing across Europe, I am sure much can be done here by the Government to improve that market.