Ciarán Lynch (Cork South Central, Labour)
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On today's agenda is scrutiny of the proposed EU regulation COM (2013) 615 on money market funds. I welcome from the Department of Finance Mr. Aidan Carrigan, assistant secretary, Mr. Patrick Brennan, assistant principal, and Mr. Martin McDermott, administrative officer. I also welcome Ms Isla Cully and Mr. Oliver Gilvarry of the Central Bank of Ireland. The witnesses are here to help the joint committee in its examination of COM (2013) 615, proposal for a regulation of the European Parliament and of the Council on money market funds. The discussion will begin with opening remarks from Mr. Carrigan and thereafter members may put questions to the witnesses as appropriate. Before we begin, witnesses should note that under the Defamation Act 2009 they are protected by absolute privilege in respect of their evidence. However, if they are directed by the joint committee to cease giving evidence on a particular matter and they continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed to restrict their evidence to the subject matter of these proceedings and to respect parliamentary practice by not criticising or making charges against a person, persons or an entity. I thank the witnesses for attending and ask Mr. Carrigan to make his opening comments.

Mr. Aidan Carrigan:

This is a technical regulatory proposal, so I will rely on my colleagues from the Central Bank of Ireland to assist in some explanations. It is important to note that much of the legislative reform programme on European banking union has now been completed. This banking union work is designed to address the risks posed to financial stability by the banking system. However, banking is just one part of the picture regarding credit intermediation. A substantial and growing element of credit is provided by the so-called shadow banking system which facilitates the provision of credit to business through the markets as an alternative to bank funding. As we near the conclusion of the new banking union framework, attention in Europe and across the world is now turning to the large shadow banking regulatory agenda.

Shadow banking is a broad term which covers a range of activities in the area of non-bank credit intermediation. It is important to note that shadow banking activities, which include securitisation, securities lending and repurchase transactions, constitute an important source of finance for financial entities. It includes entities which raise funding with deposit-like characteristics, perform maturity or liquidity transformations, allow credit risk transfer and use direct or indirect leverage. It is broadly accepted that shadow banking needs to be regulated because of its size, its close links to the regulated banking sector and the potential systemic risks that it poses. There is already some regulation of the shadow banking sector through the existing undertakings for collective investment in transferable securities, UCITS, directive, the alternative investment fund managers directive, and other EU legislation. However, some would argue that this provides only partial regulation and further measures are required.

It is in this context that the European Commission has brought forward its proposal to enhance the regulation of money market funds, which constitute possibly one of the most prominent sectors of shadow banking.
Money market funds are collective investment schemes which bring together demand and offer short-term money. They act as an important source of short-term financing for financial institutions, corporates and governments. To corporate treasurers, money market funds offer a short-term cash management tool that provides a high degree of liquidity. They are mainly used by corporations seeking to invest their excess cash for a short period, for example, until a major expenditure such as payroll is due. In Europe they are generally established as undertakings for collective investment in transferable securities, UCITS, under the UCITS directive and thus have a passport which allows for their sale across the European economic area, EEA. However, they can also be established under national laws of member states and fall within the scope of the alternative investment fund managers directive. As UCITS, they comply with European Securities and Markets Authority guidelines on money market funds.
There are two types of money market fund: those of which the net asset value - that is, the value of the assets held by the fund - is allowed to float, the variable net asset value, VNAV, fund, and those of which the net asset value does not float, namely, the constant net asset value, CNAV, fund. A CNAV fund seeks to maintain a stable €1 per share through the amortisation - or writing down - of any loss or gain in value over the life of the asset, rather than valuing at the market price on a daily basis. This kind of fund holds a particular attraction for corporate treasurers beyond its usually limited yield. The stability in the price of the fund allows for investments to be treated as similar to bank deposits in corporate accounts. By contrast, a VNAV fund is priced according to the market value of its assets at a particular point and thus its value floats in accordance with the markets for its underlying assets. It would not be correct to say it would be a straightforward matter to require all CNAV funds to convert to VNAV funds. There is evidence that most CNAV investors would leave money market funds altogether, rather than redirect their funds into VNAV money market funds.
The intention behind the money market funds regulations is to deal with the perceived risk of runs on the funds. In summary, the regulations propose the following measures: that money market funds will be required to have at least 10% of their portfolio in assets which mature within one day and another 20% which mature within one week; they may only invest in money market instruments, deposits with credit institutions, financial derivative instruments and reverse repurchase agreements; they will not be permitted to invest more than 5% of assets in money market instruments issued by the same body or 5% of its assets in deposits made with the same credit institution; they may not solicit or finance an external credit rating; they must identify the number of investors in the MMF, their needs and behaviour and the amount of their holdings; they must put in place sound stress testing processes for the fund; and CNAV funds must have a 3% a capital buffer or convert to a VNAV fund. In broad terms, these are the additional regulations being proposed by the European Commission.
The total money market funds sector in Europe amounts to some €1.3 trillion in funds. This is shared between VNAV and CNAV funds. CNAV funds are favoured by US investors and the Irish funds industry hosts up to €300 billion worth. The question, therefore, of a specific regime for the regulation of CNAV funds is of particular interest to Ireland. As structured, the proposals for the added regulation of CNAV funds pose a risk to the future of the CNAV funds sector of the Irish funds industry. We have been advised by the European Commission that the additional requirement for a CNAV buffer arises from a perception that these funds are riskier. It is argued that the apparently fixed price of an investment in a CNAV fund lulls investors into a false sense of security and that there is a market perception that the value of these funds is guaranteed. In the event that assets depreciate, the fear is that the investment manager will no longer be able to hold the net asset value steady and that investors might not get €1 or $1 back for each €1 or $1 they put in. When that happens, the CNAV fund is said to have broken the buck, so to speak. Such events are rare and seen as dramatic and could be a cause of market instability. The Commission's intention is to require buffers which would require investment managers to place aside a percentage of the value of the CNAV fund to act as a safety net in times when the fund's assets devalue to such an extent that there is a risk of the buck being broken.
We agree fully that shadow banking needs to be robustly regulated and that the risks to financial stability arising from such banking are recognised and addressed. There is no room for complacency in markets regulation. We support the general approach taken in the European Commission's regulations and are keen to play a full part in the debate on all elements. We will engage in the debate on each of the measures I outlined. The Department of Finance will approach the forthcoming Council working parties in a constructive and open-minded manner and with the hope of securing a proportionate approach to the regulation of both CNAV and VNAV funds.
Members might recall that in the European Parliament recently there were mixed views on the approach to the capital buffer for CNAV funds, with many MEPs arguing, in particular, that the potential negative impact on the industry was not fully understood. This resulted in consideration of the regulations being postponed until the election of the new Parliament. We will be highlighting this concern at the Council and encouraging a greater focus on and assessment of the consequences of this proposal. In particular, we will be making the point that the 3% capital buffer for CNAV funds is seen by many as excessive and potentially dangerous. In the context of a product which operates on very tight margins and at a time when interest rates are at an all-time low, the cost of funding a 3% buffer could render these funds uneconomic. Should this occur, it would amount to an effective ban on CNAV funds. Commissioner Daniel M. Gallagher of the US Securities and Exchange Commission, SEC, made this point well last year when, at an open meeting of that organisation, he stated:

[O]ur economists believe that in order to act as a bulwark against default risk or run risk, a buffer would have to be so large that it would not be economical for money market funds to continue to operate. And, conversely, if the buffer was small enough to be economical, then it would provide no protection against events like the ones experienced in 2008. This is not news.

[T]here could be a sudden outflow from European CNAV funds to other jurisdictions or alternative products. The consequences of this happening could result in a serious impact on the pricing and availability of short-term funding for European borrowers, in particular banks.

We will also be pointing to continuing developments in the United States where the Securities and Exchange Commission is advanced in its deliberations on how best to approach the regulation of money market funds. It is examining several approaches, but it has already made it clear that it sees capital buffers as the least effective way to achieve the goal of mitigating run risk in money market funds. The financial markets are global and both the United States and the European Union have repeatedly stated the regulation of these markets should be co-ordinated. It is important that we try to co-ordinate the EU-US approach to the regulation of these funds.

The introduction of differing rules across jurisdictions may result in the intentions of one set of legislators or regulators being frustrated, or result in unintended consequences, amplified by the international market for money market funds. A case in point is the actions taken by the Federal Reserve in 2008 when it introduced support mechanisms which eased pressures on US money market funds and improved the liquidity position of such funds but separately affected European money market funds which did not have similar support mechanisms. We will, therefore, seek to align developments in Europe with those in the United States.

The Department of Finance has been consulting a range of stakeholder interests on this issue. We have also been in contact with the European Commission and other member states. It is clear to us that while some differences of view remain on how best to enhance the regulation of money market funds, there is a growing appreciation of the concerns we are raising about the proposed approach to CNAV funds.

Our objective is to achieve enhanced regulation of money market funds as a first step towards the harmonisation of the regulation of Europe’s shadow banking sector. Within this broader objective, we are seeking to achieve an outcome to the Council working party deliberations that ensures proper, effective and proportionate regulation of both types of money market funds so as to allow the safe development and growth of this market sector in Ireland and elsewhere in Europe.

Ciarán Lynch (Cork South Central, Labour)
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I am not sure whether this meeting is being broadcast live. Just as space is the final frontier in "Star Trek", shadow banking seems to be the final frontier in finance. While concepts such as bonds, subordinated bond holders and contracts for difference have entered common financial parlance in Ireland in recent years, the matter of shadow banking is probably very much unknown to the public. Will Mr. Carrigan give us an example of it, perhaps in an Irish context? Will he outline the position of the financial services businesses in the Irish shadow banking market? Does Ireland have a significant role? Do we have shadow banking organisations here? How is business affected by shadow banking? What is the difference between going to a high street bank to obtain a loan to start a business and becoming involved in the CNAV fund processes or alternative processes?

Mr. Aidan Carrigan:

That is a very fair opening question. The term "shadow banking" is very unfortunate because it suggests some misdeed is taking place in the shadows of banking. It was not intended in that sense, although that is often how it is understood. The term reflects a large financial sector that actually operates in parallel with the banking system and is integrated in some way with that system. In that sense, it shadows the banking system. I will give a broader view and then ask my colleagues to outline the various sectors that might be in the shadow banking sector.

The funds in the shadow banking sector are broadly equivalent to those in the banking sector. However, the non-banking sector is becoming more important, as one will know from the debate on how to fund SMEs and the limitations on bank funding. An increasing number in the economic sector are looking to the non-banking sector to raise funds. Within the shadow banking sector, there are huge funds industries investing funds on behalf of investors. They are investing in corporates and other companies, in addition to various financial instruments.

Ciarán Lynch (Cork South Central, Labour)
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Might somebody who wants to engage in venture capitalism transit his fund through a shadow banking structure?

Mr. Aidan Carrigan:

Absolutely. The range of fund management instruments with which we are familiar — the collective investment funds, alternative investment funds and venture capital funds — would be employed to raise funds in the shadow banking sector and they would be invested to generate returns. In parallel, there are securitisations and the development of the market in this context to take funds off banks' books and allow banks further liquidity to lend more. It is all integrated with the banking sector. Also to be considered in the markets area is the range of derivative instruments operating in the shadow banking sector. All of these strands are separately regulated, to some extent, but the view is that there needs to be a more harmonised approach.

A difficulty in the debate on the need to regulate the shadow banking sector further is that there is no clear definition of "shadow banking sector". This is because it is a collection of a range of derivatives, funds, securities and trading and deposit-like instruments.

Ciarán Lynch (Cork South Central, Labour)
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I seek clarification on where Ireland's financial services or business are actually placed in this context.

Mr. Oliver Gilvarry:

As my colleague has outlined, shadow banking has been subject to significant debate since the crisis in 2008. The Financial Stability Board has done significant work. The first question the Chairman asked concerned shadow banking and the entities involved. The Financial Stability Board has urged that we look at activity rather than the entity involved. It is a question of determining whether it is shadow banking activity, rather than whether an entity is engaged in shadow banking. The board has done work in which the largest 20 economies have been involved. An issue arose concerning the question of whether one should try to identify whether there was credit facilitation, or whether an entity was providing credit, and whether there were maturity transformations. A bank takes in deposits on a short-term basis - through a current account or a money on demand arrangement, for example - and that money is lent for mortgages or to finance businesses over five, ten or 15 year periods. One examines these types of activity and ascertains what types of entity are involved. The money market funds sector does fall into this context in Ireland because it is acting like a bank in a sense. The securities the funds are buying are financing businesses or banks. Therefore, it is not just bank paper that money market funds are purchasing; they also purchase paper issued by corporates. Again, it is what one would call the real economy.

Ciarán Lynch (Cork South Central, Labour)
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What is the position on funds invested separately in businesses and providing financial support for organisations?

Mr. Oliver Gilvarry:

One would see - not so much from an Irish perspective - that insurance companies, for example, were purchasing properties. As they would have long-term liabilities, in the context of serious illness cover or classic pensions where future payouts are being guaranteed, they would want to place long-term assets against them. There would be purchases of fiscal assets or, at times, loans. One would see the large international insurance companies doing this. From an Irish perspective, this activity would be limited. With regard to the money market funds industry in Ireland, the funds industry, financial vehicle corporations fall within the activities the Financial Stability Board has identified in particular credit facilitations.

Ciarán Lynch (Cork South Central, Labour)
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In his opening address Mr. Aidan Carrigan spoke about how SMEs and other sectors could be supported in this area. By his Department's analysis, what is the likely impact on job creation in Ireland?

Mr. Aidan Carrigan:

We have to take this issue in the context of the broader developments in the financial market. Within Europe there is a view, based on looking back at the financial crisis, that there has been over-dependence on purely bank related financing of the economy. There are comparisons with the United States. Some 20% or 30% of the economy of the United States is actually bank financed, while the rest is financed from what one might call shadow banking but which we call alternative financial sources.

In Europe it has been the other way around and 80% has been bank financed, whereas only 20% has been supported by finance from non-bank sources. There is huge potential for this sector, if properly regulated, to provide the kind of funding which has not been made available through the equity markets, corporate issuance markets and investment markets. There is significant potential for these kinds of market, which is why I made it clear in my opening statement that we were very much in favour of proper regulation of this sector in order that it could play a greater role in supporting the economy.

I was asked twice about the size of the sector in the context of the Irish Financial Services Centre and apologise for not replying. I do not have the exact figures to hand, but we can access them, if necessary. The funds industry is a huge part of the success of the IFSC and the international financial sector. It underpins a huge part of the employment success we have achieved. Funds administration work is hugely significant. Within it, the money market fund element is very significant. It would be very damaging to the financial services industry in Ireland if there were to be terminal damage to the money market funds industry in Ireland. We are very concerned to protect it.

Ciarán Lynch (Cork South Central, Labour)
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That leads me to my last question for the moment. Mr. Carrigan has indicated that as Europe moves to some level of regulation in this area, there seems to be a divergence of views. I note the cautionary tone in his message on what would be an appropriate level of regulation. I noted the way he broke down statistics for what was happening in the USA on funding structures, as well as in Ireland and Europe. Will we end up with a harmonised approach between Ireland and the USA or will we end up with a divergent view on how this area of finance is regulated between both regions?

Mr. Aidan Carrigan:

From our point of view, it is a priority to achieve a harmonised approach. In essence, the money market funds industry globally is a US and European centred industry. Within it, Ireland plays an important role. We are keen, therefore, to have a harmonised approach and have had direct bilateral discussions with the SEC in the USA. We hope to build an understanding. On behalf of the Council of Ministers, the European Commission holds regular consultations with the USA on developments in this area. The reality is that the money market funds industry structure is somewhat different in the USA where money market funds are broken into retail, governmental and prime. We do not reflect that structure. The USA is looking at solutions around its particular structure. I do not think, therefore, that we will be able to have things that closely harmonised. However, we do want to ensure we have the same approach to regulation and try to regulate through similar systems to ensure there is no arbitrage between the two centres as centres for money markets.

Pearse Doherty (Donegal South West, Sinn Fein)
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Reading through this and given our own experience when we started to examine COM (2013) 615 more closely, it was surprising, looking at it from a very basic perspective, that the Department of Finance was raising a red flag and objecting to the idea that major financial institutions - shadow banking which accounts for billions of euro in the State - would not have a reserve - a regulator buffer of 3%. I was just thinking that if we were to forget about the term "shadow banking" and simply use the term "banking" as most of us do - it is just a matter of different products - it would not be high street banking. If one were to look at the solutions being offered, instead of having a capital reserve or buffer, the solutions the Department is suggesting are that there be liquidity fees and redemption gates. To consider this in terms of ordinary banks and apply what the Department thinks should be applied to shadow banking, there would be no capital reserves in the banks. If people wanted to withdraw money and the banks did not have it available as their assets had declined in value, there would be redemption fees. That means I would be charged more by the bank to withdraw my own money or that the redemption gates would apply and there would be a complete ban on withdrawals where assets had declined to a certain level. I find this extraordinary. I understand completely the fact that Ireland has the bulk of the market in a European context, but we must deal with the consequences.

I want the Department to look at the solutions it and the industry are putting forward. The industry has a vested interest and is making huge profits on these billion euro shadow banking funds. The Department is mirroring the industry's proposals. If the Commission were to agree with liquidity fees, for example, if a fund's liquid assets fell below a given percentage, liquidity fees could be imposed. If liquidity fees were to be imposed on a fund operating in the State, would it not send a signal to others who had invested in other funds? Could it potentially escalate a run where one manager had imposed liquidity fees? There is a similar issue with redemption gates. Some of the funds entail €120 billion worth of assets. If a fund at that level managed in the State were to trigger redemption gates and forbid anyone to redeem from the fund for a certain period, would it not cause an escalation of events and trigger problems in other shadow banking funds? Would it potentially cause problems within the wider banking sector?

Mr. Aidan Carrigan:

I thank the Deputy for the question which shows a good understanding of the issues and debate under way. In case there is any misunderstanding, I clarify that we are not proposing soft regulation of money market funds. We are fully behind enhanced regulation and the securing of the sector. Our aim is to secure the sector and regulate it in a way which does not strangle it and lose the industry to elsewhere in Europe, which is a real concern. The question is whether money market funds have equivalent pay buffers to those for the banks. I outlined in my opening statement the range of additional enhanced regulation procedures which had been introduced which might not apply to banks and I place the matter in that context. There is a limitation on what these money market funds can do with the funds. Money market funds can only have 10% of the portfolio of assets mature within one day and they must have another 20% maturing within one week. They can only invest in money market instruments, deposit with credit insitutions, financial derivative instruments and repos. They will not be permitted to invest more than 5% of their assets in market instruments issued by a particular body. There must be a dispersion. There are various other matters, all of which are aimed at reducing the risks associated with the funds. These are minimal risk funds which are very restricted in the way they can be operated. Therefore, we are not comparing like with like when comparing these funds to banks. The 3% buffer proposed does not compare, therefore, with a similar buffer in banking where the actual capital buffers are calculated based on risk-rated assets. If the buffer was calculated based on risk-rated assets in this context, it would meet many of our concerns. The risks are very low with these funds compared to the risks taken by banks.

The funds are for professional investors only. These are investors who know the risks they are taking and are managing their funds. Much of the capital requirement for the banks is designed to protect ordinary consumer investors. Mr. Gilvarry might discuss the differentiation in approach to the calculation of funds.

Mr. Oliver Gilvarry:

On the point Deputy Pearse Doherty made on the banking side, if one puts one's money on deposit in a bank, capital requirements apply. The capital requirements apply in order that if the loans or investments made by the bank are bad, there is a buffer in place to prevent depositors from losing out. On top of this, one has deposit guarantee schemes. As Mr. Carrigan outlined, money market funds are for professional investors. With the 3% buffer, one is not taking into account whether money is invested in high quality, short-dated sovereign debt.

An example would be if one were investing in German government paper, which has a three-month maturity, or in what people would call peripheral debt within Europe, which would be seen by the markets as higher risk and which would give a higher return. From a banking perspective, if banks are involved in riskier loans, the capital requirements under CRD IV and the CRR would require a greater buffer because of the risk involved. This could mean that a money market fund that is facing some pressure on its buffer would take greater risks to try to make greater returns than the fund so that it does not have to replenish the buffer from its own resources, because it is no different from investing in very high-quality safe assets and maybe taking a risk to try to get that extra return. From a banking side, one is looking at different risk ratings based on the riskiness of the asset, whereas for this 3% buffer, it is much more of a blunt tool and does not take those risks into account.

Pearse Doherty (Donegal South West, Sinn Fein)
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While I acknowledge completely that there is a difference between shadow banking and banking, the same argument made by Mr. Gilvarry in terms of the buffer could be applied to the capital of any bank where the capital is being eaten into and the bank takes riskier initiatives to build up its capital. That is a catch-22 system. Mr. Gilvarry also spoke about this being very low-risk and about German government bonds. Only 3% of the entire amount managed by these constant funds are government debt. That is the problem. Distinctions have been drawn in terms of the US model and there have been calls to converge with this model. With the constant model in the US, 80% of the funds are going into government-secured debt, which is completely different. We cannot compare apples and oranges.

Mr. Carrigan mentioned that this was low-risk and diversified. That is fine, but - correct me if I am wrong - if I invest €10 billion into one of these funds, under this constant net asset value model, I am guaranteed to get €10 billion back. The bank does not do that. While they have limited the risks in terms of how they are diversified, when the asset decreases in value there is absolutely no buffer. Not one cent is set aside to deal with the losses that would be incurred. With the best investors in the world, nobody predicted the collapse of 1998 and previous collapses. Therefore, shortfalls arise that have been made up by financial institutions in the past that do not set aside buffers for those scenarios. If we are just looking at it from a jobs perspective in respect of Ireland, I can understand why we would tell Europe to go and stuff itself, because we dominate the market in Europe, but this is a very dangerous and risky enterprise if we are not providing any type of capital buffer for any collapse in the constant net asset values of these funds. The two solutions put forward by Mr. Carrigan have also been put forward by the industry and seem to be supported by the Department. If the two solutions - the additional liquidity charge and basically refusing to allow anybody to withdraw money from the funds - were given effect, would that not cause a greater problem?

Mr. Aidan Carrigan:

First of all, we are at the outset of a negotiation at European level, so we are not determining. We are informing the committee what the issues are in the negotiation and the kind of negotiation position we are taking. We are not dealing with hard and fast conclusions here. The outcome will be some kind of compromise in these areas.

What we are saying is that the impact of the current proposal and the extent of the buffer in the current proposal has not been properly assessed and that the impact has the probability of being very damaging to this industry. I have a few comments relating to what the Deputy said. It is not our intention to guarantee corporate investors that they cannot lose money if they invest in these funds. There must be the possibility of losing money. However, these are low-risk funds and the risk of losing money is less because it is for turning over cash on short term. There is a possibility that these funds might lose money and in that case, the concern of the Government is financial stability. The Government's concern is to ensure that a run on the markets does not occur as a result of a sudden fear and to put the necessary protections in place - not to protect an investor against losing a bit of money but to protect financial stability and ensure that something does not build into a run. The benefit of gates and liquidity fees is that they limit the rate at which money can be taken out in the event of a sudden impact and, therefore, provide time for a correction and for the market to adjust. It contributes to stability, not to protecting corporate investors.

It has been pointed out that the latest figures will show that 11% is invested in government-secured debt at the moment, but that is just a small point.

Pearse Doherty (Donegal South West, Sinn Fein)
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It is still a long way off the US model, under which the figure is 80%. Mr. Carrigan is saying that the negotiations are open, but this has been on the table for quite a while. What surprises me is the position of the Department and Government. Mr. Carrigan mentioned a number of times that he is not in favour of light-touch regulation. I put it to him that this is light-touch regulation because, again, he has not be able to convince me that the solution he is putting forward would be effective. These funds have lost money in the past and will continue to lose money as assets depreciate and appreciate. What Mr. Carrigan is suggesting goes against the grain of what the European Commission is suggesting, which is that there should be a minimum buffer.

I would obviously be concerned if there were an impact in terms of job losses, but has the Department carried out any independent research rather than just listening to what the industry is saying, which is that it will close shop and move out? Has the Department carried out any independent research regarding the impact of these funds? If one were to talk to AIB, or if Richie Boucher or David Duffy were sitting here and we told him we were intending to increase the banks' tier 1 capital ratio to 15% due to a regulatory requirement, he would tell us the bank would have to close up shop, but it would manage it. Banks have managed increases in requirements under Basel I and II by increasing fees. It has been shown that an increase in fees of up to 3% would be required. That is what the industry is telling us, but I could say one could probably split the difference to get the real figure. Multinational companies and banks are investing their money in these funds. Nobody sitting around this table is investing his or her money in these funds. Yes, there are pension pots, but at the end of the day, if these funds collapse, who picks up the tab? If there is not enough money because this type of fund is not variable but constant and has given a commitment that it will pay out the money an investor paid in subject to its management fee, when the asset value falls and one of these funds collapses in Ireland, who picks up the tab?

Mr. Aidan Carrigan:

I do not disagree with much of the Deputy's commentary. He asked what advice the Department is taking on this issue. First, we have talked to a range of stakeholders. We have been communicating and have had numerous meetings with the European Commission in which we have developed our understanding of its issues. We have met with a number of other member states and will be meeting other member states. We have been party to various workshops and discussions on this. Of course we have talked to the industry as well, but we also rely heavily on our Central Bank colleagues who are with us today who have been regulating this sector successfully for many years in Ireland. Their advice relates to how we can effectively regulate this sector through a combination of the enhanced proposals, redemption gates, dealing with sponsors' issues and liquidity fees.

There are a range of liquidity issues and our assessment based on that wide consultation is that a broader range of regulatory measures can be pulled together to greatly enhance regulation and keep it secure while, at the same time, not undermining the industry. That is the balance we are trying to achieve as a Government. If the fund collapses, the investor loses. Our concern is financial stability.

Liam Twomey (Wexford, Fine Gael)
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Essentially, all we are doing is regulating international funds in Ireland.

Mr. Aidan Carrigan:

Within Europe.

Liam Twomey (Wexford, Fine Gael)
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It is in the context of the European model. Mr. Carrigan noted that in the US 80% of the funding is used for government bonds.

Mr. Aidan Carrigan:

I mentioned that 70% or 80% goes towards financing the economy. That would involve investments in areas such as equity issues and corporate bonds so that the corporate sector can raise funds to grow the economy.

Liam Twomey (Wexford, Fine Gael)
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How do the bonds operate differently between Europe and America? These markets seem to provide only 11% of government funding in Europe. Are they operating something similar on both sides of the Atlantic?

Mr. Aidan Carrigan:

We are discussing two different issues. I referred to where these money market funds are invested. In the broader context of the shadow banking sector, the economy in America looks to these alternative non-bank structures for its funding and growth, whereas Europe is more reliant on the banking sector. There is potential for growing these areas and providing more finance for the economy if we regulate them properly.

Liam Twomey (Wexford, Fine Gael)
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Business funding in America is more reliant on shadow banking as opposed to the regular banks. Have problems arisen as a result?

Mr. Aidan Carrigan:

Not excessively. There have in fact been very few runs involving money funds, which is the element of shadow banking we are considering. There is very little experience of that in the United States or Europe, although that does not mean we do not have to protect against that eventuality.

Liam Twomey (Wexford, Fine Gael)
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Essentially, these are low-risk funds.

Mr. Aidan Carrigan:

Yes.

Liam Twomey (Wexford, Fine Gael)
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They are structured in such a way that they have low regulation and there is a low cost to running them. They also give a low return to the investor. That is essentially the way they are structured.

Mr. Oliver Gilvarry:

There is a low return because of the low risk from a supervisory or regulatory point of view, both in our case and in Europe since 2008. Prior to 2008, Ireland operated a relatively onerous regime for money market funds. A review was carried out in 2010 by the predecessor to the European Securities Markets Authority, ESMA, which was followed by the development of guidelines to create a harmonised structure across Europe for money market funds by dividing them into short-term money market funds and money market funds. In Ireland the vast majority of funds are short-term. The Central Bank previously operated a set of rules on maturity profiles and the reuse of assets that funds can hold. Many of these rules have been brought into what we call the level one text, that is, the regulation now before the committee. There was and is a strong regulatory regime for the money market fund industry in Ireland.

Liam Twomey (Wexford, Fine Gael)
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Why are we so successful in managing these funds in Ireland? What attracts the funds here?

Mr. Aidan Carrigan:

It is largely due on our extensive links to the US financial system. Traditionally the US has looked to Ireland as a financial centre from which to trade with Europe. When it came to growing the money market funds, it was natural for the Irish Financial Services Centre to tap the huge resources available in America, whereas other parts of Europe might have looked elsewhere.

Mr. Oliver Gilvarry:

The historical background is that during the mid to late 1990s, US industry wanted to create a money market fund domiciled in Europe and denominated in euro. Ireland benefited for geographical reasons, including the fact that we are a time zone closer to the US, and because of the presence of US industry. The structure that existed in the United States was replicated here. One could argue this is part of the reason the Irish regulatory framework was more robust than in other jurisdictions. In reality, the money market fund sector was based in Ireland and it followed the US structure closely. The ESMA guidelines were introduced in 2010 but many of them were already in place in Ireland by the time of the crisis of 2007 and 2008.

Liam Twomey (Wexford, Fine Gael)
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Most of the money market funds in this country are very low-risk. Should we be concerned about higher risks in other areas of shadow banking? Reference was made to the connection between some of these funds and the larger banks. Is there a concern about the ratio of the deposits in these banks to the money passing through the less regulated shadow banking sector?

Mr. Aidan Carrigan:

The shadow banking sector is as big as the banking sector. Within Europe there are 40 different regulatory instruments which cover various aspects of the shadow banking sector. They deal with a range of areas, including equities, derivatives trading, high-speed trades and new trading centres. Many of these issues have been in the media in recent times because of a book published in the United States about the speed of trades. All of these are seen as a part of the shadow banking sector, and money market funds comprise a small element of that. There remains a challenge for the international community to harmonise its approach to regulating the entire shadow banking sector and the range of activities that take place within it. We deal with a range of European directives, such as MiFID, which are immensely complex because of the complexity of the sector.

Liam Twomey (Wexford, Fine Gael)
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A former member of this committee constantly reminded us of the problem of rehypothecation. Is this linked to shadow banking? Mr. Carrigan must have heard about it, given that we have heard it on at least 20 occasions. We thought the former member had extended his expertise to the Central Bank, but he must have not done so.

Mr. Oliver Gilvarry:

In essence, rehypothecation is the reuse of collateral. A money market fund that is holding cash might borrow a government or corporate bond from another party and lend cash on the back of it, with the bond as security. The issue with rehypothecation is that once a proper framework is put in place, sufficient collateral must be provided. If, for example, the bond was valued at €100, the fund would only lend €90 in cash to ensure a buffer of over-collateralisation. If there is any movement in the value of the collateral, further cash calls can happen. However, an issue can arise if the asset is further lent on through the chain and something happens.

If one of the parties to which this asset in essence has been passed fails, where does the asset lie? Who owns the asset? Within the money market fund regulation that is proposed, rehypothecation by money market funds will not be allowed. Under the Central Bank's rule book, they were not allowed to enter into rehypothecation either. If one of the counter parties fails in a pass the parcel scenario, who owns the asset? We saw in the failure of Lehman Brothers in 2008 that there were strings of collateral about which nobody knew. As Mr. Carrigan outlined, a large part of the legislation put through in Europe and internationally is aimed at increasing transparency to give regulators such as the Central Bank the tools and the information to see what is happening in these activities for which we had no information in the past because there was no requirement to pass it on to us.

Liam Twomey (Wexford, Fine Gael)
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Is Mr. Gilvarry saying regulations governing shadow banking and rehypothecation have been strengthened significantly internationally?

Mr. Oliver Gilvarry:

They have been improved. I was referencing the money market fund regulation but further rules are coming through on securities financing transactions. They were issued recently and the first Council working party was held yesterday on it. There will be a framework on transparency and reporting to competent authorities through trade repositories in this regard. The Financial Stability Board also did a consultation at the end of August last year to put forward recommendations to improve transparency and riskiness. I would not like to say it has been dealt with, but internationally people are moving forward to reduce and minimise the risks in respect of rehypothecation and securities financing transactions generally.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I thank the witnesses for their presentation. They have helped advance somewhat my knowledge of these opaque financial entities. I will have to think long and hard before I understand everything. People can call me a Luddite but this is part of the creation of a global casino in speculation. These money markets are creating a casino in speculation that is at yet another remove from any control or probably understanding of state authorities and the public and, against that background, like on the financial transactions tax, FTT, when the EU recognised that these instruments are dangerous and potentially destabilising for the European economy and want to take some action to regulate it, Ireland yet again says that while we would like to regulate and while we see the need for it, we ask that there not be too much regulation because we might lose out. That logic will scupper the FTT and has prevented us from imposing it and the same logic is being applied in this opaque area of international financial speculation. Could Mr. Carrigan respond to that allegation?

The Member, referred to by Deputy Twomey, who has raised alarms about these instruments says that one of the key features at the heart of the financial crisis was the move by banks away from prudential lending practices. Banks began to lend way more money than they had and when the loans went bad, there was a massive hole. We ended up with a massively destabilised economy and somebody had to pay the piper. Is this not the same? Money markets are so far away from prudential banking practices as to be a dangerous example of the over-financialisation of the international economy and we should try to rein them in completely, if not stamp them out. I do not see the value of them.

Mr. Aidan Carrigan:

First, financial services is a risk industry. People make money in financial services by taking risks and, if we preclude risk taking, the industry dies. We have a significant economic interest in the financial industry here and, therefore, we do not want to preclude the taking of risks. However, we want to manage the taking of those risks and to protect the economy against excessive risk-taking and the fall-out from that. The Deputy asked whether this is about the creation of a global casino. Elements of the global casino exist and this measure is about protecting the economy against misuse or abuse in the global market.

I do not accept the comparison with the FTT issue. This is completely different. This is about regulating a financial sector rather than a taxation element, and in regulating this sector, Ireland, of all countries, has to be extremely conscious of the need to protect against unexpected outcomes. We are very aware of that having been through a financial crisis.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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On risk, there are risks that people can see and understand and can say they see the point of them. For example, they could take a risk in investing in developing renewable energy because we need energy and if they invest in that area, they might develop resources that would be useful for the State and create a few jobs. That is a risk I can get. Let us take the risk of investing, for example, in afforestation because that will lead to jobs and the development of an energy source, social housing and so on. However, this measure facilitates risk in an opaque area. We do not know what is being lent to whom or for what purpose but it seems primarily to be about speculation on prices going up and down and the value of assets going up and down. I do not see how that can be anything other than a dangerous activity.

The FTT is a revenue-raising measure but one of the key reasons it was first proposed was to regulate the financial services sector, which many people in Europe rightly said was out of control and needed to be cooled down by imposing a tax on it. We are out of step with much of Europe in saying this industry should not be regulated too much and an FTT should not be imposed because it could be bad for the Irish Financial Services Centre, even though there is a good reason Europe is pushing both of these measures, which is this industry is potentially dangerous and destabilising and measures need to be taken to control and regulate it. We seem to be out of step in saying we kind of like the idea but we do not want too much regulation because it might hurt us.

Mr. Aidan Carrigan:

I am not in a position to comment in detail on the FTT, as it is outside my competence.

I turn to the financial regulation points that the Deputy makes. Within the money market funds area, I have previously commented that the Department sees this as providing a valid platform for large corporates to manage their treasury functions. It would make available to the banks liquidity that would otherwise be tied up in those corporates and provide funds which could then be used to finance the economy. We think there is something worth regulating here. We want to maintain money market funds and grow them in Ireland and Europe, and we want to enhance their regulation to protect against any abuse. We believe that proper regulation is being achieved. That is why we have representatives of the Central Bank with us today. They have commented a number of times that they have regulated such funds effectively in Ireland for the past ten years and do not see them as excessively risk-taking. I would see that as strong independent advice to the Government that these are valid financial instruments which can contribute to the economy.

Ciarán Lynch (Cork South Central, Labour)
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Deputy Boyd Barrett is out of time, but I shall give him some leeway and then Deputy Doherty will speak afterwards.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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We will have to agree to disagree, because I think this is dangerous. I shall give a further example to press the point. Credit unions, very sensibly, do not lend out money that they do not have, because they know it is a dangerous practice. We have recognised the need to increase core tier 1 capital in banks because the levels were dangerous. They were lending out way too much money as against what they had in capital. There should be loan-to-deposit ratios which do not become dangerously out of step with one another. We should recognise the need to move in that direction. I worry that Mr. Carrigan is essentially saying that the buffer, which seems very similar to having proper capital reserves or proper loan-to-deposit ratios, is not possible. That buffer is a step towards saying that we should not lend out large amounts of money which we do not really have.

Mr. Aidan Carrigan:

We are not saying that a buffer will not be part of the solution. We are saying that our clear advice is that the level of buffer currently proposed is excessive and will do extreme damage to the industry. If there is to be a buffer, we feel it should be risk-weighted. My colleague from the Central Bank outlined earlier the benefits of risk-weighting and how risk-weighting buffers are calculated by the banks. With the risk being so low here, a risk-weighted buffer would produce a reasonable buffer in relation to the risks being taken by these funds.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I have a one line question: why does Mr. Carrigan insist that the risks are low?

Mr. Aidan Carrigan:

It is short-term money. As I have outlined in the proposal, the instruments in which such funds can invest are very restricted. It is very close to deposits. The range of investments carry marginally more market risk than is the case with deposits.

Pearse Doherty (Donegal South West, Sinn Fein)
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Does Mr. Carrigan accept that there was a run on the shadow banking system in 2007-2008?

Mr. Aidan Carrigan:

Some shadow bank funds got into difficulty and those required interventions by the sponsors. The sponsors are another factor in the money market fund structure. Many of those funds are sponsored by larger entities.

Pearse Doherty (Donegal South West, Sinn Fein)
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Does he accept that there was a run and that the effects on those individual money market funds had further implications for other money market funds across the globe?

Mr. Aidan Carrigan:

Obviously, if there is a loss in confidence resulting from certain withdrawals, that has implications.

Pearse Doherty (Donegal South West, Sinn Fein)
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Does he accept that the effects of the run had an impact on money market funds across the globe?

Mr. Aidan Carrigan:

Where there is a run in a certain type of investment, it creates concerns among other people involved and increases the risks.

Pearse Doherty (Donegal South West, Sinn Fein)
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Does Mr. Carrigan accept that the run and the lack of confidence in the system at that time had an impact on the financial system in terms of overnight lending or short-term lending?

Mr. Aidan Carrigan:

What that did was to point to an issue in relation to those funds, and this has resulted in measures to enhance the regulation of those funds to protect against such issues.

Pearse Doherty (Donegal South West, Sinn Fein)
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We know there was a run because we talked about it here and we heard a lot about it all being low-risk. I am going back a couple of years to the start of the banking crisis, when the crisis materialised. There was a run on shadow banking which had an impact on many other funds across the globe which were not lending and which were very panicky at that time. That had an impact on financial institutions, which could not get short-term lending - I think that we are agreed on this. That in turn had an impact on the liquidity not just of banks in the United States but of banks here in Ireland. Would Mr. Carrigan agree with that?

Mr. Aidan Carrigan:

It was one of many contributory factors, which is part of the reason for our fully supporting enhanced regulation and reducing the risks.

Pearse Doherty (Donegal South West, Sinn Fein)
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I understand about the regulations. I am dealing with the risk issue. Does Mr. Carrigan acknowledge that the run in 2007-2008 had an impact on the liquidity of Irish banks at that time?

Mr. Aidan Carrigan:

I would not agree entirely, but I agree that it contributed to the concerns in the market that resulted in damage.

Pearse Doherty (Donegal South West, Sinn Fein)
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I do not expect Mr. Carrigan to agree entirely.

Mr. Aidan Carrigan:

It was an element of the factors that contributed to the financial problems.

Pearse Doherty (Donegal South West, Sinn Fein)
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Given Mr. Carrigan's continued reference to these instruments being low-risk, I do not expect him to go as far as the Nobel Laureate, Paul Krugman, who said that the run on the shadow banking system at that time was at the core of the financial crisis, but will he acknowledge that it had a serious impact not just in the United States, where Lehman Brothers was not able to pay out in the dollar in terms of this fund, but also on Irish banks? Therefore, when we talk about low risk, we have to acknowledge that the impact of not having substantial capital buffers in the past caused a massive risk, because liquidity dried up across the globe at that time. We were in a liquidity crisis for quite a period, which denied money not just to the financial institutions but to the economy, resulting in job losses and lack of investment. When we talk about low risk, does Mr. Carrigan acknowledge that we are talking not just about risk in investments but about risk in the shadow banking system? That is why we need appropriate regulation. One of the regulations that the European Commission believes is appropriate is capital buffers.

Mr. Aidan Carrigan:

Of course we acknowledge that there are risks associated with money market funds. I stated at the outset that we believe that this sector of shadow banking, which is the first sector of shadow banking to come up for comprehensive review, should be better regulated and that the risk of runs should be mitigated. We should reduce the risk of such runs to the greatest extent possible. There is a whole range of regulatory measures within the Commission's proposal that we fully support. We think they should be added to. We have our own ideas on increasing transparency and the use of liquidity gates for redemption fees, nor are we ruling out the buffer. We fully accept that there are risks here which need to be addressed, and we want to engage in addressing them as constructively as possible.

Pearse Doherty (Donegal South West, Sinn Fein)
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I welcome the fact that Mr. Carrigan said he was not ruling out the buffer on the behalf of the State. All the other enhanced regulations are important, but unless the industry has a capital reserve to deal with losses, it does not make a huge difference. Losses have always occurred, but sponsors have stepped in, or there is enough time for assets to appreciate again and offset the losses.

Can I ask witnesses from the Central Bank a final question?

The Department can answer this as well. If the State did not have over 70% of the European market in this type of fund, would we be arguing against a 3% buffer? The reason I put this question is that I believe the Department is blinded by the fact that 70% of the European market is located in this city. Such companies pay very little tax because they adopt elaborate tax avoidance measures. They employ a number of people, which is really important, but we could be back in 2007, when the Central Bank and the Financial Regulator were completely asleep and unaware of what was happening at Anglo Irish Bank because that bank was creating liquidity for the Irish economy, which was creating jobs and providing a tax return, and the view was that one should not worry about such matters. If that bank had been located in France, Spain or somewhere else, and we were asked to look at it, we would probably be raising a red flag. My question is if we were France, for example, which has hardly any of these funds but which has the variable funds, would we be arguing against a European Commission proposal for a 3% buffer, or would it make sense that there should be a minimum 3% buffer to allow for losses?

Mr. Aidan Carrigan:

I will comment at the outset and then ask my Central Bank colleague to comment on the buffer issue.

As I said in my opening statement, we have a particular industry here. We want to see that industry grow in order to see the economy grow. We feel that if it is appropriately regulated - we are in favour of enhanced regulation - then this industry has the potential to grow. Obviously, we have an interest. If we did not have this industry located here, then we would have less interest in it. That is a fact. If it did not affect us, we would not feel a need to protect the potential for that industry to grow. Given the potential of that industry to grow and that opportunity for Ireland and the Irish economy to grow, it is only right that we should be raising concerns if we think the industry will be unnecessarily damaged. We are not saying it should not be regulated. We are saying it should be better regulated, but, as I said, we think the 3% buffer is the wrong solution. We believe the buffer will do damage. Maybe I could ask the Central Bank to clarify the issues with the buffer.

Ciarán Lynch (Cork South Central, Labour)
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I note there is a vote in the Seanad.

Pearse Doherty (Donegal South West, Sinn Fein)
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Can we go to the Central Bank representative for that answer?

Thomas Byrne (Fianna Fail)
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May I ask a quick question?

Ciarán Lynch (Cork South Central, Labour)
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I am being patient. There is a vote in the Seanad. I will come back to the question.

Thomas Byrne (Fianna Fail)
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I have been listening to this with interest. It is good that there is a discussion on it. It is good that the officials listened to some of the comments that have been made here, because there is the hangover of what happened when we effectively deregulated the banking sector in this country and there was no debate about it.

How many jobs are there in this country in money market administration or in the industry as a whole? My question, I suppose, is what are we protecting.

Mr. Aidan Carrigan:

In broad figures, the number of jobs in the international funds industry in Ireland is 12,500. Those are direct jobs. Based on various estimates, there is something equivalent in indirect support jobs, through accounting, auditing, legal services and various other supports. This is a very significant part of our financial economy.

Thomas Byrne (Fianna Fail)
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I think Mr. Carrigan is conscious of the balancing act that is needed here. That is what I am reading from the text and the debate, but one should never forget what happened in the past few years. I must go to a vote.

Ciarán Lynch (Cork South Central, Labour)
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We will finish Deputy Pearse Doherty's question, and then briefly hear Deputies Boyd Barrett and Twomey together. Then I am wrapping up.

Pearse Doherty (Donegal South West, Sinn Fein)
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I also pointed out, as I have stated time and again, that we need to be conscious of jobs, but I would not like the message to go out from the committee that there are 12,500 jobs up for axing if this proposal goes through. Even if every fund that had to have a buffer pulled out of the country, this fund only makes up 20% of the investment portfolio. Even in the worst case scenario, one is talking about one fifth of those jobs, and I do not see them leaving the country.

I asked a question of the Central Bank. If we did not have such a concentration of funds of this type, would we be supporting a European proposal for a 3% buffer?

Ciarán Lynch (Cork South Central, Labour)
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The question was already asked.

Mr. Oliver Gilvarry:

There is a financial stability aspect as well. Even if this industry was not here, we must consider what the money market fund industry is investing in. It is investing in securities issued by entities. On the whole, those entities are financial institutions. On the points Deputy Pearse Doherty made in relation to the pressure on money markets in 2007 and 2008, and the pressures on the banking system because of runs on money market funds, we saw that affecting the system overall. Even if these funds were not here, we would have to look at the financial stability concerns for any institution based in this jurisdiction outside the money market funds - let us say, on the banking side.

The other matter we have to factor in is the point Deputy Pearse Doherty made on the French market. The French market, 99% of which is a variable net asset value market, has suffered significant runs as well, in 2007 and into 2008, and there have been a number of academic papers on that. The Boston federal reserve and also the Bank of Canada have highlighted that, and so has the Central Bank of Sweden, Sveriges Riksbank.

The issue we face here with the 3% buffer, and whether we support it, is that this sector is internationally focused and, unless there is international co-ordination, it moves offshore. Our issue with regard to the links to and concerns for the banking system is that those securities will still be issued by the European banking system and our own banks and money market funds outside this jurisdiction will be able to purchase them, so there is still a risk in relation to pressure on money market fund instruments and the banking system. If we impose a buffer, that basically means the industry will move offshore. That is why it is so important that we see international co-ordination between the two main jurisdictions, Europe and the United States, where these funds are based. The point is that the buffer is very much for constant net asset values, but we saw runs in variable net asset values as well, which were equally damaging to confidence within the banking system and the financial market system.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I have one brief comment and then a question. It seems in all of these matters it is a case of the chicken and the egg. Whether it is corporate tax, financial transaction tax or now shadow banking, we cannot do anything because it is a big international matter anyway and, therefore, we will merely protect our own interests and not worry about the bigger picture. It means the bigger picture never gets worried about, or there is no effective way for us to do anything about the bigger picture. I put that forward as a theme that constantly re-emerges. Given their impact on the global economy, I do not accept that we must sit here and accept these matters.

Are the witnesses saying that Ireland, with its somewhat outlying position in this regard, is acting as a bridge for an American approach to financing the economy, with 80% financed by this shadow banking sector and only 20% by the traditional banking sector, whereas Europe has it the other way around and is seeking greater levels of regulation? Are we positioning ourselves with an American approach to financing the economy, which is a more deregulated banking system? That is what we seem to be doing.

Liam Twomey (Wexford, Fine Gael)
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The approach we have to regulation is a balancing act. That has been discussed by Deputy Boyd Barrett in the context of prudential matters. We should also point out that funding is cheaper and the economy referred to is one of the wealthiest in the world. None of us wants to go back to bowler hats and pinstripe suits and all of the restrictions that used to exist, which were not good for economies either, but maybe Deputy Boyd Barrett will hanker back to those good old days.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Good old bowler hats.

Mr. Aidan Carrigan:

I think Deputy Boyd Barrett was confusing a couple of the points we were making about the United States market. The US market is different. It does not rely on banks as much. That was one point.

A lot of the funds we have though the constant net asset value structure are US-sourced, but those are US funds now being invested in Europe, and it is separate. They provide liquidity to our banks here.

It is a separate point but it is important to have that liquidity to feed into the European economy, and we are keen to protect that.

There is one assurance I wish to give generally. The committee can be assured that we will not be negotiating any solution at a European level which puts at risk the developments in the financial markets or which undermines in any way financial stability. We are driven, as part of a system in Europe, to come up with a better way to regulate banking - the committee can see this through the banking union - and, through the shadow banking sector, to look at money market funds. It is about securing better regulation for European financial services.

Ciarán Lynch (Cork South Central, Labour)
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That brings us back to Deputy Twomey's remark, which was more of a comment than a question.

Liam Twomey (Wexford, Fine Gael)
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That was for Deputy Boyd Barrett, who hankers for the good old days. People will have to turn up next time in pinstripe suits.

Ciarán Lynch (Cork South Central, Labour)
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It is time to put on your dinner jackets, since it is nearly 6 p.m., never mind your bowler hats. With that said I will bring matters to a conclusion. I thank Mr. Carrigan, Mr. Brennan, Mr. McDermott, Ms Cully and Mr. Gilvarry for their contributions. It is a little like Star Trek in that we boldly go where no one has gone before. Certainly, it has been one of the more complex issues I have dealt with as Chairman of the Joint Committee on Finance, Public Expenditure and Reform. I appreciate the contributions and the information given to the committee this afternoon.

I propose that a draft political contribution on the issue should go to the Minister and the EU institutions, subject to the agreement of the committee, when we wrap it up. There were various contributions today and we should compile them and then conclude our engagement on the matter. Is that agreed? Agreed.