Mr. Gerry Cross:

The question relates to the first question to Mr. Casey in terms of the balance between equity and bail-inable debt. All this is about trying to find the right balance. As the Deputy will be aware, the discussion around the leverage ratio has gone on for a number of years and among those discussions was the question of what is its purpose. For example, is it the primary thing and should we just focus in on the leverage ratio? The Americans would be closer to this position and they would say the leverage ratio is really the primary thing. In Europe, and this reflects a variety of factors, our view is that we do not want to lose risk sensitivity where we can safely retain it. In some areas, we are not as confident as we might be that having risk sensitive capital requirements will work, so there are changes taking place in that regard. However, where one can retain risk sensitivity, one should do so. That is why we have the standardised approach and the internal relations based approach, and so on.

At the same time, we know that using risk sensitivity, models and credit ratings has weaknesses, so it is important that one has something else. Therefore, the leverage ratio is designed as a backstop. It should not be biting unduly in terms of acting as the first line of defence but it should be there. If a firm has low levels of capital and that is being driven by the risk assessment of its assets, we need to be sure there is enough capital to support the overall size of the balance sheet. From our point of view, that has come out of the right place. It is a backstop and 3% is the right backstop, in our view, although discussion is going on about G-SIBs, global systemically important firms, and potentially about other systemically important firms. For now, we are comfortable that, as a backstop, it is the right thing. However, of course, it is combined with a whole range of other measures.