Transcript of Governor Gabriel Makhlouf's interview with Samantha McCaughren, The Sunday Independent

19 December 2022 Interview

Gabriel Makhlouf

Interview with Governor Makhlouf conducted 24 November 2022

Samantha McCaughren: Thank you very much for taking the time to have a chat with me – you obviously had your Financial Stability Report today, and things are looking quite different from a year ago. Is it getting hard now to forecast and predict the outlook for economies, not just our economy, but economies? There has been all these black swans seem to be coming along at a rapid rate at the moment.

Gabriel Makhlouf: Firstly, it is always hard, let’s not pretend. If any economists tell you these are our forecasts and we know perfectly what’s going to happen, they’re fooling you. But it’s become much harder since the pandemic. Firstly, the pandemic and lockdown, are obviously unique events in… actually, almost in history. Governments voluntarily closed down economies, a very unusual situation. So, that was difficult. And then of course we’ve been coming out of the pandemic. I think it’s worth making that distinction between locking down and then actually coming out, because that also was unusual, and I think partly explains some of what’s been happening. And then the period of a war, and its effect on energy prices. So, it has become harder. It doesn’t mean you can’t do anything, and I think the degree of uncertainty, that always exists in forecasting and projections, has just become a bit greater.

Samantha McCaughren: A couple of things that are high on all our agendas as consumers, as business owners, as politicians – interest rates and their effect on ordinary people and businesses is quite a big concern. I think we’re expecting in December another rise, I know there’s a bit of division at ECB level about will it be 0.75%, or will it be lower – do you expect that cycle of increases to continue well into next year, or where do you feel we might go with that?

Gabriel Makhlouf: If I can take some steps back before I answer your question directly. The last ten years have been a pretty unusual period in monetary policy, and in interest rates. Unfortunately it’s lasted for so long, that you’re going to need to be of a certain age to remember, that actually inflation used to be much higher, interest rates used to be much higher, as a norm. Which is why we have been talking, and I’ve been talking about the process we’re going through now, is monetary policy normalisation – we’re looking to normalise. In the Euro area, we had negative interest rates - an extraordinary situation. I think the process started a year ago, and that was when we took the decision in December that we were going to stop our pandemic emergency purchase programme, we gave three months’ notice, but it didn’t start till March. In practice we said, right, we’re going to stop this. And obviously that’s been followed up by interest rate rises, it’s been followed up by our other asset purchase programme – all this comes under the heading of quantitative tightening (QE) being stopped…but we haven’t stopped the reinvestment of these assets. So, the whole process of QT, which the FED has basically started, and the Bank of England just started, the ECB has not started – that will start next year. I’m mentioning all this background, to say it’s been pretty unusual set of circumstances, hence normalisation. Interest rates will go up in December. I think it’s probably too soon to say that’ll be the end of it – I would expect interest rates to continue to go up. There are many unknowns, but there’s two things in particular that’s probably worth flagging. One, and it’s been a debate you just mentioned, which is, how big should the increase be. Every time we make a change, we went through a very long period where when changes happen, they used to happen at 25 basis points. And then most recently, we’ve gone up at 75 basis points. So, people are debating, should it be 50, should it be 75. No one is debating whether it should go up – there is an acceptance that it should go up. I think when we get into next year, it may even start this year, but when we get into next year, the likelihood is that if rates go up, they go up by smaller increments, smaller than 75. But then there’s a question of, when does normalisation finish, and when are you actually in a period of tightening. So, economists talk about getting to a rate, where you’re neither adding to demand, or taking away from demand in the economy. I think where normally you can’t predict where that is anyway, but because of the uncertainty that we just talked about a few minutes ago, I think that’s particularly difficult. So, this is a very long answer to your question, to say, rates will go up in December, I am not sure by how much – and to be honest, I won’t be making my mind up until I’ve seen the evidence and the projections. ECB staff will be producing new projections for our December meeting, so that will influence me. It won’t determine, but it’ll influence me. And then we’ll have to see what’s happening to the economy, the euro-area economy, to judge how much more do we need to do and over what pace do we need to do it at.

Samantha McCaughren: Do you think if we had started some of the interest rate rises a bit earlier, if the ECB had started earlier, we’d be in a better position now, or do you think the course that was followed was the prudent approach to take?

Gabriel Makhlouf: It’s a very good question. I’m not sure we could have started much earlier, in the euro-area at least. I know the FED started earlier than us, but the nature of their inflation is a bit different to ours. We started putting up rates in July, you could debate whether we should have done it in June, and maybe even in March. But I’m not sure the evidence was there for us to have started, say 12 months ago. I think it was much more debatable. Unless you use the brilliant science of hindsight – probably if we had hindsight, all we would probably have been a very different world, I suspect. But we don’t have hindsight.

Samantha McCaughren: Just reading your comments today, there are downside risks for Ireland evidently, but there’s positives there in terms of where we stand, and where households have their buffers and all that type of thing. At what point do you think an interest rate rise, or at what point of an interest rate level would you feel that we would start to feel a little bit more strain on the economy? Is there a number somewhere along the way that we would start to tip more into that risk side of the equation?

Gabriel Makhlouf: I think the honest answer is that I couldn't put a precise number on it, because there's too many variables. The reality is that what's happening to global growth, our economy is slowing down compared to where we thought it was going to be a year ago. The whole world is slowing down. Our (economy) is actually in a sort of a better position than many others, but if you tried to take out interest rates and say at what level will interest rates start to have a particularly negative effect, being able to distinguish that, I think that’s quite hard. I think it's quite hard to say. I think the most important thing when we’re talking about interest rates and their impact on the economy in Ireland, businesses and households, is actually - and this is one of the things I was saying today - the economy - households and businesses and the State are in a far more resilient position than they were say ten years ago. So, households have lowered their indebtedness. The debt-to-income ratio in 2008 was something like 200%. It's now halved. The State’s position just over the last ten years since 2013 has changed. Households themselves in the period of the pandemic, say the last two or three years, their aggregate income growth has been significant. Just in the last couple of years we’ve had almost 10% nominal income growth. And I suppose one has to mention that for people who've got equity in their houses, equity is now much larger than it was before. I can't remember how many years ago, maybe it's more than ten years ago now, I haven't got the numbers on top of my mind - but a significant proportion of households were in negative equity. Now, it's close to zero. So, I think 40%, that sort of number. I'm giving you all these sort of numbers to say that actually Ireland, the State, Irish households, Irish businesses are in a more resilient position now. That doesn’t mean that there won't be families and there won't be businesses who are hit by inflation by these extra costs. Businesses are going to find; SMEs are going to find it harder to make a profit and some of them will struggle. Some households, in a similar way,  will find it harder which is why in my letter to the Minister in advance of his budget I made the point that actually, the most vulnerable need to be supported. They need to be supported through targeted, tailored, temporary, measures because otherwise there's always a danger that you're creating an inflation problem. But inflation itself is bad for the most vulnerable - when I talk about the most vulnerable, I mean the lowest income households - they consume a bigger proportion of their income on food and energy. So, inflation is a particular problem for them and there's one reason why, from my perspective, - and I know it sort of hurts - but actually we have to get on top of inflation. That’s the whole point of building up interest rates is to get on top of inflation, so that it doesn’t become an even bigger problem than we have today.

Samantha McCaughren: In terms of inflation and being able to actually tackle it, there's some different views on how successful and how sophisticated we are in terms of actually dealing with inflation. Quantitative tightening, easing the interest rates…like are we doing enough? Are you quite optimistic that we’d be successful in reining in that inflation or is that a little bit still untested yet?

Gabriel Makhlouf: Well, it is a pretty exceptional levels of inflation. Our target is 2% and in Ireland we’re at 9% or something. In the EU area we’re at 10.2%.

Samantha McCaughren: Multiple times over our target.

Gabriel Makhlouf: At the Governing Council of the ECB, we’re determined we are going to succeed. And I think in 12 months’ time if we’re sitting down here having this conversation, we’re expecting inflation to be lower than it is now. So, I'm confident about that. I think the question will be how long will it take to actually get to 2% but I think by the second half of next year we’ll see it lower.

Samantha McCaughren: Okay, we just have to see how low…

Gabriel Makhlouf: I think it will be going down. Obviously we don’t know what's going to happen with the war in Ukraine, et cetera. We also don’t know, and this is quite an important variable which people tend to miss out, but what's happening in the Chinese economy is quite important for us and their zero Covid policies acts as a break to global growth which impacts on the Euro area and us. So, that’s one of the uncertainties

Samantha McCaughren: And Xi Jinping taking a new direction economically as well then maybe we would have envisaged say five years ago.

Gabriel Makhlouf: Well, I think that’s probably true but I wouldn't say their policies are necessarily going to be better or worse than what they were, but I do know that the Covid policy is acting as a break in global growth.

Samantha McCaughren: It's a difficult one to back out of as well.

Gabriel Makhlouf: Well yeah, but it is their policy so they have the choice to manage it, but it's one of these uncertainties. The war is an uncertainty in terms of forecasting when will things improve et cetera.

Samantha McCaughren: You mentioned your letter to the government ahead of the budget and targeted measures. Do you think we’ve been successful at being targeted in our measures or actually is that quite a complicated thing to achieve?

Gabriel Makhlouf: Well, I think it is for the political system because there's inevitably a limit in resources and they have to make choices and there's lots of people who think that they have a claim to some of those resources better than other people’s claim to some of these resources. So, at the end it boils down to what choices does the government, and I suppose ultimately, the Oireachtas want to make. I think in Ireland you can argue that the measures could have been more targeted. I was pleased that the government actually did put some money aside because that’s one of the things I called for in my letter, and they did put some money aside. In fact some people were saying that we’ve got all this corporation tax, we should spend it on X, Y and Z - it remains the case from my perspective that we should be very cautious about assuming the corporation tax receipts are going to be some permanent thing. Building in permanent spending assuming you’re going to have this permanent income, I think that’s probably quite a big risk. So, what the government did, was from my perspective, sensible. I mean on the other measures, you could debate forever; different people have different views if the government has or hasn’t done enough. In terms of temporary, targeted and tailored, I think the temporary nature of some of what they did was pretty obvious and actually it was well done, you can argue that some things could have been more targeted.

Samantha McCaughren: Like the energy for consumers, that type of thing.

Gabriel Makhlouf: Yes.

Samantha McCaughren: Because the business one had fairly - somewhat detailed metrics as to how they would be I suppose assessed whereas the blanket money to consumers - that is a less target, it’s not a targeted approach.

Gabriel Makhlouf: No, it’s not targeted.

Samantha McCaughren: Okay but so far, I mean I know it was part of, in the US midterms, Biden’s being blamed for lots of the inflationary issues there. For you know, giving cash to ordinary people but so far here, are we seeing any kind of?

Gabriel Makhlouf: No, I think in the Euro area as a whole and also in Ireland, the nature of the inflation drivers are quite different to what they were in the US. The US is primarily a demand-led shock. In the Euro area, it was a supply-led shock but now there's a mixture of supply and demand. And the UK is sort of in between the two. At the very beginning of this inflation shock, I think it was quite clear the US was in a different position to us. I think where we are now, we’ve moved a bit closer because we’re seeing inflation now a bit more broad-based across the economy.

Samantha McCaughren: And then just we touched on briefly there - businesses and businesses SMEs may be struggling and prior…

Gabriel Makhlouf: Some, some.

Samantha McCaughren: And certainly, in the early stages of the pandemic there was an expectation that there would be a lot of insolvencies. It would seem some of the business supports helped that not happen. And there's still some predictions that they may be coming, these insolvencies. As you know there's significant electricity, energy costs and other issues like debt, interest rates and all those types of factors that affect SMEs particularly. What’s your view on that, is there going to be, do you think, some businesses that will have to go or close because of - not just what’s happening in the last few months but like there's maybe two or three years of complexity in there, income and cost base?

Gabriel Makhlouf: I do think that one of the things that’s a danger of the pandemic possibly created - this is not just an Irish thing, this is everywhere - is the sense that the government should always be stepping in and supporting any business in trouble but from an economic perspective, that’s probably not a good thing. You may have heard this term, I don’t like using it - but there's always this danger, and people talked about it in the pandemic, that the government ends up supporting zombie firms. In other words, firms that would quite naturally - and one needs to remember this, not every business succeeds - close down. And what happens is, the resources used in those firms then move - from a macro perspective - then move to more productive uses. From an economic perspective, and ultimately the welfare of a community as a whole, that is a good thing. Very painful for the individual business owner, but it’s a good thing. I think governments need to be careful - it was obvious why they did it during the pandemic, because it was the government choosing to close everything down. But now everything’s opened up. I mean we’ve got an energy shock, for example. Businesses with sustainable business models may find it hard, but by and large they will see it through. So, I think the community needs to be careful about what expectations it sets for its government, and its ministers. So, I wouldn’t support the reintroduction of non-targeted business support measures for everybody. Targeted, tailored, temporary measures - you need to work out exactly what it is you’re trying to achieve. Ultimately you do want to avoid using resources in areas that ultimately are, would be negative for the country as a whole.

Samantha McCaughren: Yes, I understand what you’re saying because at the end of the day, like for example there was an expectation that the warehouse tax or warehouse debt will be dealt with early in the New Year. And I suppose it’s just headlines are going to be difficult, if a lot of businesses have to close within a space of maybe 12 months. But inevitably there have been an incredibly low of insolvencies. Even compared to quite strong economic years.

Gabriel Makhlouf: It’s interesting how strong the labour market still is in Ireland. Our participation rates or the number of people in the labour market has gone up, mainly women and younger people. The US is a bit similar to the UK, but the UK and I’ll mention it because I was reading something; over-55s have left the labour market, an amazing proportion of them have left the labour market. Which you know, potentially could lead the Bank of England to put up interest rates. Because if the labour market has shrunk, and as a result the cost of labour goes up, you can just see the sort of consequences. It’s more an interesting societal thing, what’s happened there and it appears to be partly people taking early retirement, partly people falling sick, long term health issues, which we’re not seeing here, so it’s very interesting. One of the other things here with SMEs, which is probably relevant to something we were talking about a few minutes ago, but a sizeable proportion of SMEs do not have any bank debt. So, coming out of the financial crisis, people I think decided, actually, we are not going to take out loans, we are not going to become indebted. Which means that interest rates going up won't affect SMEs directly, what will affect them is the rising cost of energy. And the fact that consumers who buy their products will be more constrained in their spending.

Samantha McCaughren: We’re seeing reports from several areas about how demand is continuing for hiring. Do you have any concerns about that because there's a few high-profile announcements and everyone suddenly decides to panic about tech being a high-risk kind of area. Is that something overplayed? The numbers at the moment don’t show anything to be concerned about, as far as I know. Do you think it’s something we should be concerned about?

Gabriel Makhlouf: Well, we should keep an eye on it. During the pandemic and through the pandemic period, tech boomed, particularly in Ireland. And all these big firms went on these massive recruitment schemes. They employed lots of people and they grew. And what we’ve seen in the last few weeks of these announcements is that this growth has either been paused or it’s been reduced a bit. We haven’t seen people saying we’re going to go back to the size we were three years ago. You know, things might change. But at the moment we haven’t seen signs of it falling back to what it was before. So, what we’re seeing in tech is a response to the global slowdown. And in particular in the tech sector, that very rapid increase in the size of the sector over the last two years just wasn’t sustainable. But these businesses are still here. They’re still very big. We do need to keep a close eye on what’s happening.

Samantha McCaughren: And like, bringing it back then to the whole question about corporate tax and…

Gabriel Makhlouf: Tech aren’t the only people who pay corporate tax.

Samantha McCaughren: People forget about farming when we talk about FDI sometimes, I think. It’s renamed now, but the Rainy-Day Fund essentially. Are you happy with the amount that was put in? And I think quite quickly after it was announced, there was some suggestion that we may have to look at it next year for energy crisis or something. But that’s an important thing I guess to ringfence, but also are you happy? Is it adequate do you think, given the portion it is of that corporate tax surplus?

Gabriel Makhlouf: I think to be fair to the Minister for Finance who’s trying to juggle different demands, I think what he put aside, if I remember rightly for 2023 and a bigger amount for 2024. I think the total of it is slightly less than what we recommended. Because we’ve done some analysis that basically concluded around €8 billion is the…I can’t remember what language we used but it’s along the lines of it’s sort of surplus, and that’s what you should probably put away. I think (the government) might have put away €6 billion. So, I think from my perspective I can’t quibble.

Samantha McCaughren: OK. It goes a long way towards what you were recommending.

Gabriel Makhlouf: Yeah. And it’s important. I’d like to make this point because I think from my perspective, the government needs that sort of fund not just to manage shocks that may come in the future,whether in energy or whatever. Our economy and the European economy, and actually most of the developed world’s economies, are in transition. We’ve started this transition. We don’t necessarily recognise it but they’re in transition in at least three respects. One is climate change, which has arrived. Because there’s this target of net zero in 2050, there’s this assumption that it’s all ahead of us. But climate change is here and the question is can we get on top of it before it overwhelms us. Secondly, demography. Societies are ageing and that has implications. It has partly implications for our spending, paying pensions and all this sort of stuff. But it also has implications for what the labour force will look like in the future. We’re going to have an older labour force, but what does that mean is a big question. The third thing, which I suppose we’re much more familiar with, is just the whole digitalisation. These are three big, what I call, economic transitions. Some of them you can see, climate change being one, demography being the other one, you can see will have implications for the state. I am a strong believer in medium to long-term planning and I think the government needs to be setting aside resources for building resilience. Because a lot of what I was announcing today in Financial Stability Review is about the resilience of the financial system. But we’re talking about resilience now in the next few years. But I think this reserve fund should really be looked at as something that is building resilience for the long term. So, I’d be cautious, in other words, about people saying we’re going to spend it all on, you know, energy or whatever, soon because I think that would cost us in the long term.

Samantha McCaughren: It would probably defeat the purpose of it as well.

Gabriel Makhlouf: The reality is that energy prices have gone up and we as a community are going to have to bear the costs of that. Someone has to pay. And hopefully it will accelerate the move towards cheaper technology, green technology, which initially will be expensive but hopefully it will become cheaper. When I say someone has to pay, the reality is that there is no money tree. In the end, the government spends our money. So, it’s not as if it’s some free good over there….they're making payments on behalf of the community, so the community in the end has to pay for what’s ahead of us.

Samantha McCaughren: I take your point there. In terms of the LDIs and the trust debacle. I think you’ve raised it as a concern as well. Is there any impact on the Irish market? I don’t think probably there would be any issue here but a lot of the funds would have been based here. Is that right?

Gabriel Makhlouf: The pension funds themselves are not based here because the pension funds are based in the UK. But the LDIs, they’re based here. But it’s the pension funds who really got into trouble. But the LDIs were here. And our pension funds incidentally in Ireland are…we don’t have the sort of defined benefit type schemes that they have in the UK. So, the LDI issue, apart from obviously as a fund based here, we’ve got responsibilities to make sure the global financial system doesn’t fall over either, so we were in constant discussion with UK authorities on that. I think in some respects, that’s a fairly ring-fenced issue. But it’s also an example of the other thing that I was discussing today which is the growth of non-bank financial intermediation. Which obviously has happened over the last decade. You know, partly on the back of regulators across the world making sure that banks don’t fall over again, so they don’t cause the crisis that they caused back then. We’ve spent a decade as regulators making sure banks are well-capitalised, et cetera, et cetera. One of the consequences of that is that funds have grown much more. And regulators over the last decade have spent quite a bit of time making sure that, in the case of funds, investment protection rules are working. Retail consumers are protected. What we haven’t done enough of is say to ourselves ‘are these funds actually creating risk to the financial stability of the system as whole?’ and my answer to that question is yes, because they’ve become so big that they’ve become systemic, and there are interconnections to the rest of the financial system, but also to the real economy. Some of it is hidden, it’s not visible enough, and the LDI and the UK pension fund issue is an example of that – no one saw it.  That’s not fair – the Bank of England had flagged this as a potential issue a few years ago, but I think it was probably on a list of many issues, but no one really saw this coming. And that’s an example in, at the beginning of the pandemic, we had what we call a dash for cash, where people suddenly decided they wanted to take their cash out of funds, and the funds themselves didn’t have the cash because they weren’t liquid, so they had to start selling their assets, and then you got into this loop which was only saved by the FED and other central banks stepping in. The LDI thing was just another example of a near miss, and part of what we’ve announced today is a set of rules targeted on excessively leveraged property funds in Ireland, focused on Irish property. We’re saying actually there ought to be a limit and we’re setting a limit of 60%, and we’re also going to give them guidance on liquidity.  But I mean essentially funds create problems, systemic problems, because they’re either overleveraged, or there’s a liquidity mismatch. In other words, they give the impression that if you put your money into a fund, you can take it out whenever you want, but actually they then invest in assets that can’t…

Samantha McCaughren: Be immediately accessed…

Gabriel Makhlouf: And then they create the problem, and it tends to then feed into, essentially it loops.  Just to go back on the substance. Today we’ve focused on property funds in Ireland, but actually this is part of a much bigger thing that I think needs to happen across the globe, which is we now need a set of rules, essentially a macroprudential framework, that operates for non-banks.  So, we’ve introduced rules for banks over the last ten years, and which we operate here, but we need an equivalent for non-banks, and that’s the discussion. I think a number of my colleagues around the world agree with that…but in the end you need it agreed at global level.

Samantha McCaughren: Yeah, because it’s so interdependent and complex now I suppose.

Gabriel Makhlouf: Yeah, so which is why what we’ve announced today is pretty targeted. And we were able to target it, but I’m not sure we can go much further on our own.

Samantha McCaughren: Just in terms of the mortgage rules, it obviously gets a huge amount of attention any time.

Gabriel Makhlouf: Understandably.

Samantha McCaughren: Everybody knows somebody who’s trying to buy a house basically.  There was a bit of reaction, but are you comfortable it was the best route, to make some small changes, but you don’t think it’s probably going to have much of an effect on the market overall?

Gabriel Makhlouf: Just to go back a bit on what we did. We had rules for about seven years, and the rules had worked. So, I decided we should review how they’ve worked to make sure they’ll work for another seven years’. It was an extensive review, lots of work done by the Central Bank.  We commissioned work by external academics and we did an international conference, we consulted the public, and in the end, we concluded in a few respects we should tweak the rules. I see them as tweaks, because in the end a lot of our judgements are about the benefits and costs. We concluded that in a couple of areas the costs were probably slightly higher than they needed to be, and ultimately you saw that in our change in the first-time buyer loan to income rule, and the second and subsequent buyer loan to value rules essentially – they’re the most significant changes anyway.  I said at the time, and I haven’t changed my mind, which is all things equal, those changes would probably have a slight impact on house prices, push them up slightly. But of course all things are not equal, because to be honest what’s affecting, in the short term anyway, issues around housing demand will be with the cost of borrowing, which is starting to change, for example.  Fundamentally the challenges that everyone you know who wants to buy a house are facing, is that we’re not as a country building enough houses…sorry, that’s not fair, because flats as well. We’re not building enough dwellings to meet the demand. We’ve got this demand supply imbalance, and we haven’t recovered. We were building 60,000 dwellings just before the financial crisis, and we’re now at 30,000 roughly, so you know halved. We need to find a way of getting back to that. It’s not a uniquely Irish issue this.

Samantha McCaughren: Is it all the more complex because the cost side for builders is on the increase, and it’s a balance?

Gabriel Makhlouf: Well now it’s going to become more difficult because the costs are going up for builders, I agree. It’s one of the things we had to think about. We’re not going to change this every three months or anything. We keep everything under review, and the cost to the industry of building will adjust over time, because we are going to get inflation down, energy is going to get fixed, et cetera. The housing supply issue is not uniquely Irish.  When I came here from New Zealand I immediately recognised every newspaper headline I saw here, because it’s exactly the same in New Zealand, or it was at least when I was there. Attractive places, and it tends to be cities, but I mean the Irish economy has been booming, but you know Sydney, Vancouver, Zurich and so on – people want to move there and they want to live there. Ireland’s population numbers, migration numbers, FDI, all of these things create demand for somewhere to live, and we have not, for a whole bunch of reasons, we don’t appear to have got that working well.

Samantha McCaughren: Last question then – do you think the KBC/Ulster Bank exit is going in an acceptable direction?  Are you happy enough with how that’s playing out?  I know you’ve made some statements over the last number of months on it.

Gabriel Makhlouf: The statement in particular you might be referring to was the customer experience has been mixed. As I was saying to someone who asked me a question about this earlier today, I have heard both ends of the spectrum. I have heard people tell me – this is all anecdotes, saying to me ‘oh, it was easy’. And then I have heard people saying to me it was completely nightmare. And that just reflects people’s own circumstances. The most important thing to be honest is that banks are leaving. Everyone who has an account in them, needs to move that account. The sooner I think people start to do that, the better. But everybody involved has a role to play, to make this thing, this process – which is a pretty major process – work.  The departing banks need to make it as smooth as possible. The importing banks need to make it as smooth as possible, the utility companies and everyone else who is involved in the direct debit / standing order processes, need to make it as easy as possible. The regulator – us – need to make sure that we are working closely with everybody. The BPFI, everyone needs to be focused on getting this transition to work. Because sometimes I worry that people think it is going to somehow not happen. But it is going to happen. The banks are leaving. In fact I asked people here, how many of our staff have moved their accounts. And a significant proportion have moved their accounts…

Samantha McCaughren: Straw poll

Gabriel Makhlouf: Just to be clear what I have just said to you – basically the salaries that we are paying people, have moved from KBC, Ulster, to somewhere else. Not all of them, but a significant number. So, there are people still to move. That doesn’t mean that people have closed their Ulster and KBC accounts. That is one of the reasons some of this is a bit complicated. Because some people, and you may know some, have opened new accounts and they haven’t closed the old one. Just as an example. I just think we all need to focus on getting this done.