Mr. Patrick Neary:

Thank you very much, Chairman. Yes, I think you've set out a number of things there but, at the core of this, is the option chosen by the authority in relation to the way it carried out its business and it shows a principles-led regulatory approach. Now, that meant that it was a combination of the statutory requirements, some of which I outlined already and we'll just go through them again: capital, proper capital, liquidity; making sure there were proper provisions made for bad debts, ensuring that there was fit and proper management in place etc. etc., we've gone through all of those but they were ... they're the key indicators of prudential soundness, capital and liquidity especially. On top of that, the authority chose to build, if you like, a further layer of principles, which was directed at each bank and the directors of each bank and what they were obliged to do and I think actually it's set out there in the core documents, I'm sure we'll come to them later on.

Now, I suppose that recognised ... the concept, I think, behind that in the mind of the authority was that, first of all, you had very ... should ... we had experienced directors in the banks that had been with them for a long time. The banks had built up serious resources. I mean, for example, in earlier testimony by one of the banks, they told the committee that they had 200 people in the risk management unit alone. I mean, compared to our resources, that was a lot of people. So, there was trust and reliance placed on the boards and management of the banks to conduct their affairs prudently and properly. That was part of the model of supervision that was put in place by the authority and that clearly failed. Now, I mean, it does stretch credibility, and there's no denying it, that what we were faced here with was a pretty straightforward, you know, lending crisis. I mean, banks, I believe, with hindsight, should have known what they were doing. They should have been able to, you know, grant loans and make sure they had them properly secured and make sure they were being repaid. I mean, that's the very least you would expect them to do and I think that's what the principles-led approach to supervision expected. And, you know, as part of our quality assurance process then, we had our reviews and our inspections which tried to assess the processes and the procedures they had put in place, the banks, to assess ... to monitor risk, control risk and make sure it was reported into the boards and that it defined and controlled the risk appetite.