Mr. John Hannigan:

Most funders, when lending, require one to make a degree of surplus so there will be what they call "interest cover". Thus, if one defaults, there is an amount of money large enough to allow the funder to take its interest, at least in terms of the year or period question. There is a covenant requirement. In the majority of cases, the funder does so much due diligence in respect of the organisations that the chances of a body to which it is lending making a loss should be reduced significantly. Where a loss is made, the circumstances are normally considered over a period of time. The Charities Regulator has also got to the point where, in any particular year, it is does not allow the organisation to budget for a loss. It does not like the organisation to plan for a loss. If it makes a loss, regard is had to how it has performed over a period and whether it has reserves that can cover it for the period in question. Obviously, if an organisation continued to make losses over a longer period, it would probably go into a default situation. The regulator would be asking why that is occurring and whether it is down to poor governance, poor management or financial viability issues. Our colleagues behind us are expert in this area, as they have already demonstrated.

Overcoming the problem involves consideration of the value of the assets. If one defaults, the bank, regardless of whether it is a State bank, the HFA, or another, will take possession. That has never happened in this sector in Ireland. Actually, it has never happened in the sector in the United Kingdom either. That sector has been in existence for roughly the same time, but on a much bigger scale and involving much bigger figures. At this point, we have a very well-run sector. Very shortly, I hope, it will have a statutory regulation. There is still quite a lot of oversight by local authorities and the Department in terms of each scheme that we have to go through. There is a significant amount of due diligence work done by both local authorities and the State in terms of each scheme that we provide at this point in time. The circumstances are also examined by the relevant third-party bank, be it the HFA, EIB or a private lender such as Allied Irish Banks or Bank of Ireland. Therefore, there is a significant amount of due diligence done that I hope will mean we will not see a default that would put the assets at risk.