Banks will not need extra capital, says Central Bank
Growth forecast trimmed by 0.1pc to 1.2pc on weaker exports
THE Central Bank believes the State's banks will not need any further capital, but it cannot rule it out.
The Dame Street bank said talks on the timing of the next round of "stress tests" that will review the health of the banks are ongoing. The reviews were expected to take place in the second half of the year.
The results of the stress tests will be used to assess the financial health of the institutions as the country prepares to exit the bailout.
Lars Frisell, Central Bank chief economist, said Irish banks are among the best capitalised in the world
But he added: "We cannot rule out that they will need more capital as a result of the stress test. The capital injections that have taken place – they're quite significant as you know, and the capital levels in Irish banks are very, very high. That's our view going into these stress tests."
The top economist said the focus of the stress tests will be on potential losses surrounding mortgage arrears.
Mr Frisell was speaking at the publication of the Central Bank's latest quarterly bulletin.
The Central Bank revised down the growth projections for the Irish economy this year by 0.1pc to 1.2pc amid a less positive outlook for exports.
By contrast, the decline in domestic demand may be at an end and is expected to stabilise this year, signalling renewed confidence and an improvement in the domestic economy. Demand grew modestly in the second half of last year.
Exports have managed to weather the global slump well, but the continued deterioration in export markets have led to a downward revision of 2.5pc in their performance by the Central Bank this year.
The value of goods exports, particularly pharmaceuticals have slowed sharply over the past year, but services exports have jumped rapidly, especially IT services.
Central Bank economist John Flynn pointed to positive developments in the domestic economy.
"The drop in domestic demand in 2012 was the smallest in the last five years, and we actually saw domestic demand grow modestly in the second half of 2012," he said.
Key points from the quarterly bulletin include:
• GDP revised down marginally for this year to 1.2pc, 2.5pc is projected for next year, but this is dependent on a pick-up in exports.
• Exports still lead recovery but with a less positive outlook.
• Domestic demand to stabilise this year.
• Services exports accounted for 51pc of total exports by the end of last year.
• Pace of employment decline last year eased to its slowest rate since 2008 amid signs of stabilisation in the labour market.
• Unemployment rate projected to fall to 13.9pc next year, from 14.5pc this year.
• Evidence that the decline in construction may be coming to a halt.