Professor Philip Lane:

We will deal with the economics of banks and then the economics of non-banks. If one thinks about the banks, one way to think about the regulations and the issue of calculated risk rates and so on is to ensure that banks take a prudential approach to lending. I think we have had this conversation many times but like it or not, we had a big crisis here.

Like it or not, there have been many non-performing mortgage loans. It is important to have a globally consistent approach to regulation in order that they are not undercut by different jurisdictions having different views on this. It can be argued that it is a little bureaucratic and so on, but below that is the basic reality of the Irish economy that any regulator will ask questions as to how much it is prudentially sound to lend into Ireland. This is why there is a capital allocation against mortgages. Non-banks do not have this kind of regulatory oversight because they do not take consumer deposits. As a result, the kinds of concerns regulators have are different. As non-banks, they must raise money in the wholesale markets and then the bond investors and so on will also make calls about their prudential judgment. We do not see non-banks coming in with super low mortgage pricing.

This is not the place to look to find what would be the key to unlocking the competition in the banking system. As President Draghi stated when he was before the committee - and as we have said before - the more we have a stable system, the more we prove that we will not have another crisis and that we have a mortgage market which works, the more some of these concerns will fade away over time. Where we are right now remains a matter of concern, however. Perhaps Mr. Sibley can-----