Joe O'Toole (Independent)

Senator Twomey referred to my previous comments. I have regularly discussed this matter with the regulators, who informed me several times that they are not worried about the banks collapsing on the basis of people being unable to meet their mortgage repayments. Nor are they worried about the banks' solvency.

Traditionally, the loan to value ratio and its related liquidity were determined on the basis of a point in time. The regulators of the Central Bank would consider a bank's experience and determine what level of liquidity was required. In recent years and uniquely in Europe, the Financial Regulator has taken a forward-looking approach to liquidity. He has considered the possible future needs for liquidity and required the banks to meet them. Accordingly, their asset levels in terms of loan to value are stronger than ever.

The current issue is that of the banks doing their ordinary day-to-day business. As the Minister stated, they must draw down short-term interbank lending, but they cannot do their business because the period is getting shorter. The net effect is that, when a shopkeeper wants to buy stock or a contractor wants to buy a pallet of blocks or a couple of bags of cement, no money is available. This is a matter of liquidity, the issue with which we are trying to deal. The cost to the taxpayer is only relevant after we have drawn down by fire-sale or otherwise whatever assets and securities a bank might happen to have. Only then would we have to meet that guarantee with hard cash. Only an extraordinary set of circumstances would bring that about. I cannot imagine such circumstances.