Mr. Ken Burke:

Members had questions on how the scheme operated in the context of the level of Exchequer funding. I believe the chief executive of the Strategic Banking Corporation of Ireland, SBCI, appeared before the committee. It was very much for SBCI to negotiate how that operation worked in terms of the funding it had received.

From AIB's perspective, we bid for a certain element of the fund and the arrangement is that there is no upfront payment to AIB. Effectively, AIB and SBCI agree a list of eligible loans and then in arrears, as interest is charged to those customers, details are forwarded to SBCI. Within 30 days of receiving that report, SBCI transfers an interest subsidy to AIB. As Nick Ashmore would have said, the scheme is cost neutral. Why is it cost neutral? The answer is that, effectively, AIB opened the scheme to more customers than would normally be eligible.

On the point about customers who were experiencing cashflow difficulty or who did not have collateral to post, we were very explicit that no additional collateral was required and we relaxed our lending criteria to allow more challenged customers into the scheme. That interest subsidy is paid in arrears. In the context of the risk sharing element of the scheme, in the unlikely event that an account becomes impaired, we report that to SBCI so the bank will follow it up and chase repayment from the farming customer in the ordinary course of the event. If there is a loss to the bank, SBCI transfer 80% of that loss in the individual case to the bank up to a cap of 12% of the portfolio level perspective. There is no upfront payment to the bank - it is very much in arrears - but equally if the bank was to reclaim money from that borrower, we remit the money back to SBCI so there is a net effect in that context.

Deputy Penrose raised the question of overdraft rates. I hope I have dealt with that in the context of AIB's SBCI facility of 4.5% and our foreign credit line of 3.825%, which works alongside the normal overdraft rates. It is up to customers to decide how they work their overdraft with other forms of lower cost funding.

On the question of the AIB's credit experience with the farming sector, thankfully our loss experience with the farming sector has been much less than other sectors. If we look at every euro that we have afforded to the farming sector, 67 cent is in credit funds with the bank. Those amounts are only increasing. Our loan loss experience with the agri sector has been comparatively better than other sectors and no different from the way AIB works with private customers in difficulty. Where customers are co-operating, we want to ensure we keep customers in homes and in businesses, and we work with businesses to find an acceptable solution. That is foremost in our mind, and acutely so in respect of the agri sector. We acknowledge that some elements of our agri portfolio did go off balance sheet and take on other forms of investments, and we are dealing with those as sensitively as we can.