Basel II regulatory obligations dictated that the bank undertake an internal capital adequacy assessment process to assess capital adequacy against the banks risk profile. This was undertaken in early 2007 and the results were submitted as required to the Financial Regulator. Bank of Ireland considered three different stress scenarios as part of this process; the first we assumed all prices would reach $200 a barrel and remain there for an extended period. The second stress was a significant reduction in foreign direct investment in Ireland due to material changes in the corporate tax rate and the third stress was a sudden drop of 20% in Irish and UK residential property values.

We considered these scenarios to be severe at the time; they were considered in fact to be in the one in 25 likelihood of occurring within a one-year timeframe. We did not believe that we were vulnerable to a shock of this extent, however we were wrong. As we know now, the severity of what ultimately occurred was considerably greater than this. According to the Oliver Wyman review of risk governance in Bank of Ireland undertaken in 2009, the bank stress position was ultimately due to the combination of the severe downturn in the Irish and UK economies and the lack of liquidity in wholesale markets. There was an assumption in the 2006 strategy that Bank of Ireland's core lending business could be grown strongly and that the required funding could be sourced. As things transpired both of these assumptions were flawed. Unless we had taken a very contrarian position relative to peers, Bank of Ireland was naturally exposed to the macro risks in our core markets of Ireland and the UK.

Oliver Wyman also identified three broad limitations which contributed to Bank of Ireland's stress position; one, risks in the core business and strategy may not have been fully appreciated. Two, risk management and control was not geared towards understanding the aggregate risk profile and three, the link between the overall exposure limits and the risk appetite statement was incomplete and dependent on expert judgement. While improved risk governance structures, in particular the availability of consistent risk information, would have helped the bank to more fully realise the amount and nature of the risk it was accumulating at an earlier stage and potentially reduce the impact of the crisis, the bank's fundamental difficulties arose primarily because the strategy did not anticipate the exceptional extent of the reduction in property values combined with the contraction in wholesale money markets.

I personally deeply regret this failure and its consequences. Notwithstanding the fact that the State has been repaid in full by the bank, I regret that State assistance was required to support the bank and that shareholders lost a significant proportion of their investment in Bank of Ireland. I am very sorry that this ultimately happened on my watch. Throughout the 2000s, my colleagues and I, together with the board, made judgments based on what we genuinely believed were solid grounds following thorough analysis and significant challenge. These judgments good or bad, were always made in a considered fashion and in good faith. It is encouraging today to see Bank of Ireland make significant progress in its own recovery and in the recovery of the Irish economy. The State's support for the bank at a pivotal point in its history has been profoundly instrumental in facilitating this recovery. Thank you Chairman.