Mr. Cormac Butler:

In order to answer if the banks insolvent at the moment, the question that must be asked of them is if they are valuing loans at their recoverable amount. They will not be able to answer "Yes" to that question because, under accounting standard IAS 39, and its replacement accounting standard, banks are not required to value loans at recoverable amounts. They are allowed to used historical values. If I lend the Senator €1 million and she can only afford to repay €400,000, according to current accounting rules, I show the loan at €1 million and not €400,000. That is against the law because the judgment in AssetCo Plc v. Grant Thornton UK LLP means that an entity must identify how much it has genuinely lost before it can pay a dividend. When the banks come before the committee, committee members should ask for an assurance that all loans are never valued above the amount the banks expect to recover. The banks are solvent if they genuinely give the committee that assurance but, if they do not give that assurance, they are not measuring their solvency correctly and, as was the case in 2008, there could be a huge mountain of hidden losses.