Mr. Adrian Varley:

The new measures introduce the capital side in respect of loss coverage but the Deputy is absolutely right in that our supervisors were examining how many accounting provisions were already in place, which is probably what he is referring to. Loans in arrears have to be assessed and the bank holds money for the accounting provisions. In the past in Ireland we have also done numerous assessments to see from a prudential view whether that is enough money, so factoring in more risk. We have imposed that directly by persuading the banks to hold more money to capture the uncertainty in that assessment. That is the local approach. The regulation sets out an approach which does exactly the same process but the final step is that now the bank has to explicitly remove that amount of money - the difference we view, the gap - from its own funds. That is the amount of capital it tells the market it has. The new feature, of which I am very supportive, is how the bank comes out and tells the market it is safe, that 15% or 17% is already factored in. In other approaches, when it is an add-on or supervisory measure, we do not see it in the market data. That is the only difference. The loss coverage is the same but it is a question of how it is applied.