Lenihan confident banks will pass European stress tests
Irish banks will pass the European stress tests and will have far less problems than other European banks, Finance Minister Brian Lenihan claimed yesterday.
The stress test results are due to be published on July 23, although arguments continued last night in Brussels about what precisely will be included in the results.
Most European politicians and regulators want to make them as transparent as those released by the US last year. While that exercise had its critics, the publication of the results restored confidence for many leading US banks at the time.
Problems
"It's not for me to say there are no problems, but I think Irish banks should have less problems than many others in Europe,'' said Mr Lenihan at a press conference in Dublin.
He said the Financial Regulator and the Central Bank had already stress-tested the Irish banks and these tests were very "rigorous''.
The release of the results pose dangers for Bank of Ireland and particularly for AIB. Already a research note from JP Morgan Cazenove said the two Irish banks may be among a group of 11 in danger of failing the tests to be undertaken by the Committee of European Banking Supervisors.
In its main exercise, JP Morgan Cazenove said AIB would need a capital injection of €1.39bn to pass the stress test, on top of the €7.4bn the Financial Regulator has already mandated it to raise.
The same exercise said Bank of Ireland would need another €1.4bn to pass the tests, in addition to the €2.66bn the bank has already raised to satisfy demands by the Financial Regulator's March stress tests.
Last night, European officials pledged "maximum transparency" when they publish the results.
"The results will be published on July 23 on a consolidated basis, that is, at group level, including foreign branches and subsidiaries," a European Commission spokeswoman in Brussels said, clarifying earlier comments by Belgian Finance Minister Didier Reynders. Belgium currently holds the rotating European Union presidency.
Also European officials said banks must try to raise money themselves before seeking state support if stress tests by regulators reveal "vulnerabilities".
"It is firstly up to the banks themselves," Dutch Finance Minister Jan Kees de Jager said in Brussels after a meeting with eurozone counterparts.
"They will get a certain period to refinance themselves in the market, but the countries will immediately announce that there is a certain backstop."
European Union Economic and Monetary Affairs Commissioner Olli Rehn said banks should first look at "financing from the markets" to build up capital buffers.
If that fails, the "first public line of defence" will be national funds. "Vulnerabilities" will be examined "case by case", he said.
- Emmet Oliver
Irish Independent
