Dr. Kieran McQuinn:

It is a very interesting question. A number of factors are associated with it. First, our financial system has no real direct exposure to the Russian financial system apart from some of the entities in the IFSC. We do not have exposure in terms of our mainstream banks and banks regulated here. The direct exposure of the Irish financial sector to such an event is relatively limited. However, obviously you cannot control things and it is very difficult to assess what happens to entities that are exposed to the Russian financial system to which we may be related or connected. As Dr. O'Toole pointed out earlier, a number of Austrian, French and Italian banks have significant exposure to the Russian financial sector.

In terms of the overall impact of a sovereign default, one would probably see pressure in respect of the risk premia, upward pressure on interest rates across the system and interbank rates and possibly resulting in upward pressure on rates at the household and firm level. However, a clear agent in that will be the response of the monetary authority and particularly the ECB. If the ECB decides to try to insulate households and firms in the euro area from those upward pressures, it can do that. Much will depend on its response. Without wishing in any way to underestimate the impact, it is fair to say there is a relatively limited exposure of the Irish financial economic system to such a shock, but inevitably there would be some implications.

The other point to make, and Dr. O'Toole made it earlier, is that the Irish financial sector is much more resilient now than it was 15 years ago. When the financial crisis hit in 2007 we were particularly exposed because of the exposures in our financial sector. We are in a much stronger, more stable position. Most financial institutions across Europe are as well, following the impacts of the financial crisis.