Friday 20 October 2017

IL&P to be included in summer stress tests

Laura Noonan

Laura Noonan

IRISH Life & Permanent will be included in this summer's round of Europe-wide banking stress tests for the first time, regulators revealed yesterday.

The European Banking Authority (EBA) announced the full list of banks to be tested and also gave further details of the parameters for an exercise that promises to be "tougher" than last year's widely criticised run.

But analysts here said they expected Irish banks to sail through the tests since the key target, a core tier one equity rate of 5pc, is lower than the 6pc rate imposed by the Irish version of the stress tests last week.

The Irish tests have also included many of the same stresses or shocks modelled in the EBA version, so the market isn't expecting any surprises in results for IL&P, AIB and BOI, which will take the test for the second year.

While the tests may not send shockwaves through Ireland's soon-to-be-recapitalised banks, the EBA has insisted that they are "tougher" than last year's version and are a credible measure of banks' robustness.

"Make no mistake, 5pc of core tier one is harder in comparison with last year," said James Babicz head of risk at SAS, a business analytics company.

"But I think you have to look at how risky a bank is rather than look at a static capital threshold," he added.

In a statement, the EBA admitted the 5pc benchmark was "not a legal requirement".

"The EBA expects any bank failing to meet the benchmark, or showing specific weaknesses in the stress test, to agree with the relevant supervisory authority the appropriate remedial measures and execute them in due time," the statement added.

European banks are already set to raise at least €40bn this year.

Irish Independent

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