Business Irish

Wednesday 1 March 2017

Bank of Ireland and AIB set to pass EU stress tests

Bank of Ireland and Allied Irish Banks, the country’s two biggest banks, are both set to pass the European Union’s stress tests on the region’s lenders, according to a person with direct knowledge of the matter.

Bank of Ireland’s €2.9bn fundraising last month gave the lender enough capital to meet the threshold set by EU regulators, said the person, who declined to be identified because the talks are private.

Allied Irish Banks, the second-biggest lender by market value, passed because regulators included in their calculations the €7.4bn the bank plans to raise by the end of the year, said another person who declined to be identified.

The Committee of European Banking Supervisors, which is coordinating the tests, may yet alter its calculations for AIB, one of the people said.

The lender is selling overseas assets, including its stakes in Poland’s Bank Zachodni and M&T Bank in the US, to raise the capital it needs.

Chairman Dan O’Connor told the company’s annual general meeting in May the bank may sell new stock to bolster capital. The Government has pledged to underwrite the fundraising.

The two lenders are among 91 European banks undergoing stress tests to show whether they can withstand a shrinking economy and drop in the value of government bonds.

The financial regulator told the two banks to raise a combined €10bn by the end of December, following the stress test of domestic lenders in March.

Jill Forde, a spokeswoman for the financial regulator, AIB spokesman Alan Kelly and Bank of Ireland spokeswoman Anne Mathews all declined to comment.

Under the tests, banks will be required to have a Tier 1 capital ratio of at least 6pc in 2011.

Firms that fail to meet the standard will be required to raise additional capital, people briefed on the talks said this week.

Bloomberg

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