Mr. Vasileios Madouros:

A couple of points arise out of what Mr. Makhlouf said. One of the big changes has been in the valuation approach to specific assets. In the case of a loan book, this moved from taking impairments, if loans were incurred and actual evidence of loss was seen, to expected loss. The view at the time was that impairments meant waiting too long, if losses had already been carried. This move towards expected loss provisioning was an attempt to guard against that. This operated for the first time during the Covid pandemic when there was real stress globally. There was some evidence, certainly in Irish banking, that banks took on more provisions recognising some of these potential losses earlier on.

One thing that has certainly changed is the prudential regime for the banking system. That has changed significantly across many different dimensions since before the financial crisis. There are elements of that which interact with the accounting regime. One very narrow example is that in determining what counts as regulatory capital, there are a number of adjustments to what would count as accounting equity to get to the view that regulatory capital can absorb losses that are appropriate from a prudential perspective. That interaction is also important.