Everything you need to know about stress tests
Q: Stress test? Isn't that something you do when you smoke too much and work too hard?
A: Not if you are a bank; these tests are designed to finally tell us how much the banks need to stay afloat and tell us what should happen to the banking sector. The problem is that what the banks may eventually need depends on the state of the economy.
The boffins hired by the Central Bank are trying to work out how much money the country's lenders will require if things get a little bit worse or really bad.
How bad is really bad?
That's the problem. The so-called worst case scenario sees unemployment hitting 14.9pc this year and residential property prices falling 60pc overall.
Where do these people live? That describes my neighbourhood perfectly.
The cynics are already calling the whole thing a charade but people will carp whatever scenario is used.
The Central Bank has to make a call but there's no doubt that the test's most pessimistic scenario is uncomfortably close to the situation today.
I try not to think about the banks but I can't help noticing that this stress test business sounds very familiar.
It is. Europe tried one last year when 91 banks were tested. Problem is that Bank of Ireland and AIB passed those tests despite seven other banks failing.
A few months later, the two Irish banks were knocking on the Department of Finance's door begging for money. It really was a charade.
So what happens today?
Finance Minister Michael Noonan will outline his plans for a "credible banking structure" this afternoon and we will all learn the latest estimate for bailing out the banks. We're talking tens of billions of euro here.
That sounds familiar as well! So where is this cash coming from? Those nasty Germans and Frenchies I suppose?
Got it in one. It will come from the €85bn bailout fund that Enda Kenny is always complaining about.
About €35bn has been set aside to help the banks. We'll find out how much of that money we need to borrow.
Did all the banks have to do a stress test?
Only four; AIB, Bank of Ireland, EBS and Irish Life & Permanent.
Anglo Irish and Irish Nationwide were examined as the government has already admitted that they heading the way of the dodo.
I have a few Irish Life & Permanent shares lying around somewhere since their flotation back in 1990s. I'm hearing that the shares are suspended and it is being taken into state ownership. What will happen to my shares?
We'll find out later today but the omens are not good. Shareholders in Anglo Irish were wiped out completely back in January 2008. The Government promised it would look at compensation but so far there has been nothing but silence. Allied Irish shares are still listed on the junior branch of the Dublin stock exchange but they are virtually worthless.
So why list the shares at all? I thought AIB had been taken into State ownership?
Banks and governments don't mix well so the last Government took steps to keep the banks it bailed out at arm's length.
The shares in the bank are held by the National Treasury Management Agency for the State.
This saves the Finance Minister from getting it in the neck every time a widow is evicted from her house by a state-owned bank. It also makes it easier to sell the bank should a buyer ever emerge.
But the State owns the NTMA so the State owns 92pc of the bank, which is about as much as the State owns of most semi-state bodies.
I'm confused. Will the banks be owned and controlled by the State or not?
The most likely scenario is that the State will soon own more than half of every Irish bank which has no foreign parent. This means it could decide on almost every aspect of the banks' operations but it won't do this. The banks will continue to operate like a private company; employees won't be civil servants, and profits will be shared between shareholders and the State.
So will they be state-owned or not?
Well, the State will have the power to dismiss directors, block strategic decisions and get most of the profit but probably won't use those powers. As the old saying goes; If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck.