Mr. Sean Farrell:

Many issues have been raised but I am sure if I leave one out the Vice Chairman will remind me.

There are several themes in the questions, one is prices and the cost of credit. Mr. Lauhoff will address that specifically.

One of the other themes feeds into the Vice Chairman's points about taxation and cash flow. Deputy Penrose spoke about the optimism and excitement about dairying. We view the agrisector through the lens of volatility, the ups and downs of good and bad years, and we try not to get too excited when there is a particularly good year for profitability or to get too concerned when there is a more challenging year with low levels of profitability. Irish agriculture has significant competitive advantage over some of its international counterparts and costs of production, while certainly higher here this year, stand us in good stead compared with some international competitors. We understand, taking the taxation example, that we will need to give support later this year in terms of cash flow as that feeds through the system.

Deputy Martin Kenny or Senator Paul Daly mentioned merchant credit and how much of that has come through to the system, and will come through later in the year. Looking back to the last fodder crisis we expect that the cost of this challenge will feed through into current accounts and lending later this year. Last time around this was experienced in the following spring. We may receive requests at that point. Our operating model remains the same once we are comfortable with long-term viability.

The other point concerned our interaction with the Government and the Minister for Agriculture, Food and the Marine and our conversations with him. Bank of Ireland's chief executive officer, Ms McDonagh, met the Minister in the past couple of weeks. He impressed on us, as the committee has done, the importance of supplying credit to the sector at a competitive margin. At that meeting we clearly outlined our appetite to continue to support the sector, as we are doing today.

It is not that we are particularly focused on dairying. That is where the demand has come from. Most of our customers are not dairy farmers. The majority have some exposure to the beef sector, be it sucklers or other types of beef production, and we have a significant portion of tillage farmer customers and are acutely aware of the requirement to support them, as we are of the significance of CAP. While the 5% announcement made earlier this week is probably an early indication of where the budget might go our view is that there is some conversation to be had about the direction of that budget within the overall EU and within member states. How that will end in respect of individual farmer payments has some way to go yet. We continue to monitor and assess that.

I have tried to address some of the issues raised. I will ask Mr. Lauhoff to address the overall cost of credit because it is relevant not only to the agrimarket but to all business banking markets.