Mr. Adrian Varley:

I thank Senator Conway-Walsh for her question. There are two aspects to my response, the first of which concerns process, governance and co-ordination. There was a timing difference, meaning the SSM was keen to act quickly, with a wider scope and supervisory measures which were based more on bank-specific judgments on banks working out their NPL strategies, as the Senator suggests. The Commission, some time after that process, came to the conclusion that change in the form of a regulatory response was required, which was narrower in scope. That opens up a discussion as to why it only applies to new lending and why it will be a few years before it takes effect. Essentially, that is a process answer.

In terms of substance, one of the issues is having a wide range of toolkits for transparency of risk. We want a change in regulation in order that all banks are abiding by the same rules and we want to signal that well in advance so there are no surprises. That is the Commission proposal but I reiterate that it is on new lending now that becomes non-performing in the future. It does not relate to the current stock of NPLs. The SSM measures are very much part of the supervisory toolkit which is now communicated better and more clearly to the industry. There are two different and complementary, rather than contradictory, aspects to this.