Dr. Colin Hunt:

The Deputy is correct, in that the risk weights applying to Irish banks are significantly greater than they are elsewhere in the eurozone. The primary driver of that is the losses that were experienced in this sector in Ireland during the global financial crisis. The loss experience of Irish banks was significantly greater than that of the average European bank. The models that are used to determine the risk weights that are applied to our capital today are a reflection of the decisions that were made in the 2000s and the events of 2008 to 2013. It is a reflection of historical experience. Those very severe default records and losses will remain part of our modelling framework in perpetuity. We do not control that. They are there because of the history of the Irish banks and the losses that we reported.

The best way that we can influence this is by ensuring that the lending we engage in today is prudent, appropriate and sustainable and that we never again return to the sort of imprudent lending practices that created the environment in which we had those significant loan losses. I expect that those risk weights will reduce over time.

We have just had an extraordinary crisis and we are still emerging from it at a pace that is uncertain. It has been a global crisis that has impacted on businesses and households around the world. Those data points will factor into the model-generated risk-weighted assets, so there may be a significant relativity change over the course of the next number of quarters. I assure the committee that, as those risk weights reduce and the benefits of years and years of prudent, sustainable and appropriate lending are felt, it will have a compressing impact on the spread between the average European mortgage rate and the average Irish mortgage rate. There is a direct link between the spread that is there in terms of interest rates and the spread that is there in terms of risk-weighted assets.