Ms Francesca McDonagh:

I also welcome the recent report issued by the Department of Finance on risk-weighted assets in Ireland. The density of risk-weighting in Ireland, particularly on mortgages, is a multiple of the European average. We cover that issue in our annual results. Other research in the market has compared mortgage pricing in Ireland with the European market. It is difficult to make direct comparison because application fees are common in other markets but we do not have them in Ireland. The cash-back aspect is also a differentiator. Mortgage risk-weighted assets in Ireland, which vary from 35% to 40%, are 3.2 times the average in Europe, where it is 11%. That translates into an Irish bank needing to hold €50 in capital against every €1,000 it lends in mortgages. The typical European bank needs just €16.

That gives an idea of the comparison and that feeds into the conversation on pricing. People state the absolute price of a mortgage in Ireland is higher than in Europe. We would state that is not a fair comparison because of the application fees and cash-back elements and because of the amount of capital banks must hold against risk-weighted assets. That density is much higher and reflects historic losses experienced in the Irish mortgage market during the depth of the crisis. It also reflects the time it takes for the legal process in Ireland to work through cases and some other factors. We welcome the report from the Department of Finance and the comparison is vivid and important. We will speak to our investors frequently about this issue and it is reflected in pricing. It is a key driver of our mortgage pricing.