Dr. Donal Donovan:

This is a complicated issue. Until the late 1970s or early 1980s, the imposition of ceilings was the way banking was regulated in Ireland, perhaps to good effect. All of that went out of fashion and was discarded through much of Europe, although not in every country. Arguably, the absence of the ratios contributed greatly to the banking collapse. Following the crash, everyone took another look at this issue and I have a sense that many in the Central Bank would like to have those powers for use as backstops. I cannot comment on whether they have the powers, however. While I was involved in the Honohan inquiry, there was extensive discussion among people in the Central Bank about whether they had those powers. One might think it a straightforward question but it was not in fact straightforward.

I imagine it is something the new European banking supervision authority would seek to discuss and consider. For such ratios to be effective they must be applied generally throughout the euro area. Otherwise there would be so many loopholes and escape clauses that they could not be effective. This could be on the agenda because not all European countries followed the Irish example.