Professor Philip Lane:

We have publicly discussed this situation before. In August 2007, the original notification came in. There was an inspection by the Central Bank in early October 2007 and the investigation concluded that the reported breach did not suggest a wider and more systematic erosion of overall liquidity and that the bank was back in compliance within the limits within 24 hours.

Additional claims were made in 2010, both in the media and the Seanad, that there had been numerous breaches of liquidity by the firm in question. A further investigation was undertaken at the instruction of the Central Bank. An independent third-party firm was engaged to check compliance with the liquidity requirements. This investigation did not highlight any further breaches.

There was significant investigation of the issues raised and the matter is closed. More generally, the overall message reflected in the letter cited by the Chairman is that if there are liquidity breaches, the correct way to deal with them is through investigation. If an investigation establishes a systematic regulatory violation, the administrative sanctions procedure would be invoked. The general answer is correct. If we see systematic breaches, that is how it would be handled.

In this case, the initial breach was closed quickly and did not suggest a wider or more systematic erosion of overall liquidity. That was double-checked because not only did the original investigation take place, a further investigation took place, including a cross-check from an independent firm. There was no indication that any further breaches had taken place.