Ms Francesca McDonagh:

I will take two questions NPE performance and where we are right now and the question on the topic of securitisation.

As the Deputy said, we have made very good progress in reducing our NPEs as a percentage of our total book. We have the lowest NPEs of any bank in Ireland currently of €5 billion, which is 6.3% of our total lending book. That has been going down consistently through working with our customers to find individual solutions. We speak to our customers and find forbearance solutions that work for them. When we speak to a customer who has come to us or we have identified as having financial distress, we find that in nine out of ten of those cases we are able to find a solution and those solutions hold. That has been a positive improvement.

Our NPE performance and that reduction is over four times better than the industry average. We have talked about getting close to 5% by the end of 2019. The Deputy is correct that we do not have a 5% target. Some other banks in Europe may have but 5% is a psychological line to cross to get to a more normalised level. The average NPE of European banks is 3% to 4%. We are focusing on getting to 5% and then to continue. To date, we have done that exclusively from working with our customers. We signalled, in the course of 2018, that we are looking at all options on the table and that we are open to all of the resolution strategies that could exist to reduce that further. That is primarily because the definitions of what is impaired, a default and the capital that is allocated to those non-performing exposures is changing. There is more and more financial incentive and reason to reduce NPEs because they are becoming more capital intensive. Capital is finite and comes at an expense. We can allocate that capital to supporting growth in our lending book and supporting Irish consumers and businesses. We can use that capital to invest in our systems, improve customer service, meet regulatory requirements and make returns to our shareholders, which include the taxpayer. We have trade-offs there. We find that the amount of capital that is allocated to, for example, a non-performing buy-to-let mortgage is ten times the capital needed to allocate to a performing principal dwelling home, PDH, type mortgage. That just gives the committee an idea of the quantum.

Let me outline one of the options. Last week, we articulated or announced our intention for a securitisation of part of our non-performing buy-to-let mortgage book. This is a transaction that we intend to do for approximately €375 million, which will create a securitisation of the cash flow from those mortgages. There will be no transfer of legal title nor will there be any intention of a transfer of servicing of those mortgages. From a customer perspective, we will continue to engage with the customer and collect the mortgage. Nothing will change from a customer lens.