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Friday 9 December 2016

Brussels to give verdict on banks' restructuring this month

Joe Brennan

Published 10/03/2010 | 05:00

Brussels is expected to outline its verdict on the restructuring plans of Ireland's two big banks by the end of the month.

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This would coincide with the Government's planned announ- cement on the level of capital banks will need to raise, as information comes through on the discounts faced on their first batch of NAMA-bound loans.

A spokesperson for the EU Competition Commissioner Joaquin Almunia declined to comment other than to say that "the assessment is still ongoing in both cases" and that it was not yet possible to say when the rulings would be made.

Sources familiar with the process said the Commission will need to have sight of the Government's view on what capital ratios the banks will need to meet before completing its review.

The new head of the Financial Regulator, Matthew Elderfield, and his ultimate boss, Central Bank governor Patrick Honohan, are key players in establishing the new capital levels.

Ability

The general consensus in the market is that European banks need to reach an 8pc equity capital ratio -- a key level of a lender's ability to withstand a shock loss -- by the end of 2012.

However, there is a strong view among some analysts that Irish banks will need to hit this target earlier to convince international investors that they are in full recovery mode.

Mr Elderfield's first public appearance tomorrow will be keenly monitored by market players for clues on the watchdog's thinking on the key issue.

Although Brussels gave NAMA the green light, senior European Central Bank officials have been concerned that delays in reaching a decision on the banks' restructuring plans could undermine the entire bank rescue project.

It is understood that case officers dealing with the Irish bank plans are concerned they are restricted in what pain they can inflict on the lenders in the domestic market, where they enjoy industry-leading positions in a number of segments.

Irish Independent

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