as such, involvement of external equity in such a transaction would likely be necessary. indeed, from a national point of view, the entry of foreign purchasers for some or all of the banks would help transfer both credit and liquidity risk to those in a better position to bear them. this is not as far - fetched a scenario as it might appear to some ; astute bankers recognize that there is profitable banking business to be done in ireland in the years to come, though they will differ on the optimal timing and pricing of entry. we ’ ll be contributing to an intensified effort to identify viable measures along these lines to select and implement the most cost - effective of them, as it is clear that all will benefit from greater market confidence in the financial situation of the banks as in the sovereign. towards a virtuous circle this is a virtuous circle we are seeking to enter and exploit. even if moving towards a stronger banking system in terms of capital and liquidity has entailed costly outlays for the state, it is a prerequisite for ensuring the credit of the state. likewise, healthier public finances are indispensible for keeping interest costs and ensuring that the banks have ready access to market funding. in the end, i believe it is the prospects for effective fiscal adjustment against the background of the global macroeconomic recovery that will most directly determine the degree to which investors will be fully convinced that the banks have been de - risked and strengthened in the manner envisaged by the basel 3 process, and thus able to contribute more effectively themselves to the consolidation of that recovery. besides, even if there is a negative initial demand effect, healthy government finances are – like healthy banks – needed for job creation and economic recovery.

more granular analysis of the this part of the portfolio in particular to track its evolving performance and determine whether the expected loss amounts remain sufficient. this is a long - term book and its lifetime performance will not be precisely known for many years, nevertheless, it is important to have early awareness as possible of any deterioration resulting from the evolving macroeconomic conditions, and take any necessary consequential regulatory steps. accelerating basel 3 agenda as the basel 3 programme is implemented for ireland, both in terms of capital and liquidity, and supported by the intensified supervision process which we have been putting in place, the underpinnings of investor confidence will be strengthened. bank boards and management will be already thinking along these lines. the faster this can be achieved, the better, and – though that is more easily said than done – it is clearly desirable to aim for a earlier restoration of confidence. capital : already the 7 per cent equity requirement imposed by the central bank resonates with the same percentage built into basel 3, though the basel definition of capital is rather more stringent. presumably over - capitalizing the banks would also help build confidence, but this is not something which the state can be lightly asked to do, given the pressures on its finances. indeed, the market ’ s perception of the stressed condition of the sovereign is surely weighing also on the banks in terms of interest costs and ready access to funding ; just as the banking problems have weighed on the sovereign. liquidity : in order to meet the basel liquidity ratios, the banks will, over time, have to either find new sources of long - term funding, or – more likely – dispose of some of their assets. packaging sizable blocks of, say, residential mortgages and selling them to international investment funds ( while continuing to administer the loans at the retail level ) is one conceivable way of achieving the basel long - term stable funding ratio in a way that allows the banks to de - risk further by funding a much higher proportion of their remaining asset portfolio with their own retail and corporate customer deposits, and not be so dependent as they are at present on short - term wholesale funding including central bank funding. to be sure, any such operation would certainly have to be designed in such a way that the new structures did not bring additional moral hazard with them. achieving such sales at realistic prices in the current market climate – with market participants distrustful of all forms of residential mortgage backed security would likely require some form of credit enhancement.