Mr. Cormac Butler:

The question of whether a bank should be under public control or private control has several aspects to it. Let us consider the situation where they are left under private control. There is the possibility that the system could work as long as banks are reminded to comply with company law. That means they must disclose all their losses, reveal everything to the markets and disclose annual reports which are correct. The benefit of that is that it is easier for them to raise capital overseas. It is easy for them to provide capital. We certainly would not have the disastrous situation where a person through the monthly rental payments can afford not one but two mortgages. One quick solution to the problem is to get to the private banks to comply with company law. If they comply with company law, the Central Bank will more or less allow them to lend to whomever they wish provided they record losses correctly. That means it is self-correcting and there is no need for Government intervention.

However, there is a strong case for public intervention in the sense that a public bank may have to do what the private banks are unwilling to do. We know there is a large gap in the market because people in their 20s and 30s will be rent prisoners for the rest of their lives unless something changes. Therefore, there is an argument that the public sector could get involved if the private sector banking system does not clean up its act.

We want banks to be measuring risk correctly. For instance, someone training to be a dentist will have lower income in earlier years and greater income in later years. The bank might decide to exceed the 3.5 times annual earnings limit and perhaps bring it to four times because such a person will earn more money in the future. There is nothing wrong with that. However, the banks are not allowed to do that. They are following the rules the Central Bank offers them, but the Central Bank rules are too crude. A civil servant on a decent salary with wealthy parents can pull the deposit together and will be able to borrow money. However, for all other people, those in the private sector, the rules are extremely unfair. Therefore, there is an argument for public intervention.

The ultimate objective is to ensure that risk is measured correctly. They should be incentivised to say to a customer, "Look, there's no way you're going to be able to afford this mortgage. You need to be realistic and come down to a level that you're willing to pay."

In other cases they may tell a trainee dentist that they realise that it will be challenging in the early years but they will earn more money later on so they can structure a solution for them whereby they can get off the rental sector, get into a mortgage, maybe even reduce the mortgage rent knowing that the customer will become safer down the line.

I will not venture to suggest which way it should go, obviously the committee members are the policy makers and have a better understanding but these are the points that should be considered. First, there is a vacuum in the market. It is possible that the Government may decide to leave it in the private sector but it would need the banks to comply with company law. If it decides to go to the public sector, you need to make sure that there is a system in place where risk is measured correctly to discourage customers from taking out mortgages that they cannot afford.