Kathryn Reilly (Sinn Fein)
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I thank the Chairman and welcome the delegates to the House. In regard to the mortgage directive, how will it benefit Irish consumers who have unsustainable mortgages? By allowing greater competition in the mortgage market is the EU repeating the mistakes of the past by encouraging reckless lending as the only way of gaining competitive edge? Following on from what has been said earlier in terms of the European Council meetings and the need to break the link between the banks and the sovereign, many of the ratings agencies have said that while mortgage arrears continue to rise there is a risk that bank losses will exceed the PCAR assumptions and hinder the recovery of the banking sector. The chief economist at Davy Stockbrokers said he expects the main Irish banks' mortgage losses to exceed the €9 billion envisaged in the 2011 stress tests.

Last week, as part of the discussion on EMU and strengthening our economic integration, Dr. Alan Ahearne and Professor John McHale appeared before the committee. Dr. Ahearne mentioned breaking the link between the banks and the sovereign. When I asked how we could go about doing this he mentioned the single banking resolution and said the stress test should happen sooner rather than later to show if the banks are under-capitalised as investors are worried about the uncertainly around the banks as opposed to the fiscal situation in Ireland. When I asked from where more capital would come, he mentioned that, perhaps, some European fund could be linked to the single resolution mechanism. In terms of bailing-in he said it was not clear if policymakers would choose such action in the absence of a general lender of last resort to the banking system. Perhaps I could have an opinion on the bailing-in, the lender of last resort, from where potential funding to capitalise banks would come, and the stress test.