Mr. Patrick Casey:

I am not familiar with the Bundesbank opinion to which Deputy Doherty referred. There is, if one likes, a split between global systemically important banks in the regime being introduced under the proposals. For global systemically important banks, there is a Pillar 1 and Pillar 2 requirement akin to the capital regime. This means there is a minimum requirement for total loss absorbing capital and a Pillar 2 concept or an add-on equivalent to the concept in the capital regime.

To be clear, the supervisory authorities ascertain the capital requirements of an institution on a going concern basis. The concept of TLAC or MREL is something akin to twice that, which is the gone concern capital, so that if the firm fails in due course by virtue of the risks identified from the supervisors - if they were to come to pass - then all of the losses to emerge would be absorbed by the capital requirements. The gone concern capital, which sits on top of the regulatory capital, is usually in the form of debt and this element can then facilitate the recapitalisation of an institution to avoid taxpayer bailouts. That is the broad concept.

We would be supportive of a distinction being drawn in the package between the global systemically important banks and the other banks. The Deputy may ask why we support this distinction. Given that the larger banks operate on a multinational basis, they need to meet a standard amount of Pillar 1 requirement. This distinguishes them from other banks, for example, institutions in Ireland where we favour setting minimum requirements on an institution-specific basis, thus keeping the architecture that is currently on the Statute Book. This allows us to calibrate the level of minimum requirement for eligible liabilities on a basis that takes into account the specific risks of the institution. We favour the current regime in that regard as it provides flexibility. My argument, therefore, is similar to the argument made by Mr. Cross.

If I recall correctly, the Deputy's second question related to requiring a cap for systemic banks.