Mr. Brian Hayes:

I will make two points in response. There are two features of the Irish system in terms of profitability that are unique compared with other eurozone countries. BPFI did a report with EY only a year and a half ago. Some 80% of income in the Irish model is interest rate income. The equivalent percentage in the eurozone is 54%. The income driven by fees in other banking sectors is far more substantial than it is here. It is inevitable in a circumstance of interest rate rises, as a consequence of the actions of the ECB, that profitability will grow in the Irish sector because we are more dependent on interest rate income.

The other unique characteristic of the Irish system is tracker mortgages, which are linked directly to the ECB position. There are no trackers in a great number of the other eurozone countries. Some 20% of the Irish book is composed of tracker mortgages. That drives profitability.

There is one other valid point that we need to reflect upon. When Ulster Bank and KBC left the market, they took €4.5 billion in capital out of this jurisdiction. They are now deploying it in other jurisdictions where they believe they can get a better return on equity and capital. It is critically important, therefore, that our banks are profitable because it is profitability that drives capital. Without capital, you cannot lend or invest. The capital component is critical not just in terms of preparing for loss absorption in bad times but also in generating new lending. Most people are not aware that the full effect of Ulster Bank and KBC leaving is a loss of €4.5 billion from our system.

That is why it is critically important that our banks are profitable on a sustainable basis. This year is a particularly profitable year but it is sustainability that is absolutely critical.