Mr. Cormac Butler:

Good afternoon. I am a risk consultant based mainly in the UK, and cover issues like the Basel Accords and the international financial reporting standards, IFRS. Previously I have given evidence to the UK House of Lords on the UK banking crisis.

The failure of EBS to originate new mortgages has put considerable pressure on the tied agents. Many were not able to meet the commission targets from investment products and risked compromising their reputation through aggressive sales in order to make up for the commission lost on mortgages.

A number of weak policy decisions taken by EBS may have contributed to this problem. EBS faced closure from the capital markets when it came to raising funds and in the end had to receive Government bailouts, as well as cutting back considerably on the amount of mortgages it offered, a factor that caused considerable distress to the tied agents.

One matter that contributed to the banking crisis, that is not yet corrected, is the obligation to reveal the financial position of the society to existing and potential investors and depositors. According to some, building societies are not allowed to reveal their solvency position, with the result that it will be very difficult for them to attract investors and fund mortgages. The cost of capital for Irish banks is unusually high, and this is because investors do not find Irish banks a safe and attractive proposition. The result is that tied agents cannot sell mortgages as they once did.

EBS received a State bailout of about €2.3 billion and suffered a 57% discount on assets sold to NAMA. Its failure to attract funds forced it into a firesale of assets which in turn led to further losses. Tied agents were naturally unready for this change in circumstance and in my view would have benefited considerably if the correct financial position was disclosed.

I am convinced that the difficulties of the tied agents could have been avoided if the directors were permitted to reveal their financial position correctly at an earlier stage. There is a lot of misleading information on this matter which I believe the committee should look into. In the UK there are the same concerns. Thames Valley Police Commissioner, Mr. Anthony Stansfeld, has suggested examining how banks measure their solvency and believes that many financial transactions may be overturned unless this matter is corrected. Thank you.