Mr. Brendan McDonagh:

Yes, well maybe if I give sort of an example of this might be the best way to show it to you ... on day one the bank did lend 70% loan-to-value, they all seemed to ... in response to questions I put to them during 2009, all the institutions basically came back and said they were limited to a maximum 70% loan-to-value. There was one of the institutions admitted it was lending close to a 100% loan-to-value but that was an outlier.

So, on day 1, an institution might have lent somebody €70 million for a €100 million project. That would be a 70% loan to value. Typically, what happened as property prices begin to rise, the debtor went in and said:

Listen, I have seen another building I want to buy. It's €100 million. Will you lend that to me? The reason you can lend that to me is that the original building which you lent me on which was 70% loan to value, valued at €100 million, is now worth €120 million.

The bank, it seems to me, then says, "Okay yes we will give you the full €100 million to buy the second building so, when you look at it, we have assets worth €220 million and you only have €170 million worth of borrowing so that's 77% loan to value." So it still looks very prudent to anyone who comes in to look at the paper files to say the banks are still within their limits of lending. Of course, the issue is that, when property prices start falling, that equity which was there from €100 million to €120 million disappears and also the new building that you bought which was effectively 100% lending at €100 million has probably dropped in value as well, so your loan valuations shoot through the roof. So, you can say that it looked to be clever lending, it looked to be good lending at the time but effectively the debtor was not putting up any additional equity for the second asset that he bought. He was using the increase in value of the existing building to get the money for the next thing. We've seen examples of that in the portfolio.