Lenders need capital as losses mount: Central Bank
Irish lenders will need additional capital this year as loan losses mount amid rising unemployment, the Central Bank has said.
“Economic prospects make it clear that some further loan losses can be expected even after the crystallisation of losses on the transfer to NAMA,” the bank said today in its quarterly bulletin, referring to the National Asset Management Agency (NAMA).
“The operating environment for Irish banks remains very challenging.”
Gross domestic product will shrink 1pc in 2010, Central Bank said, compared with an October forecast for a 2.3pc contraction. The economy may expand 2pc to 3pc next year, the bank said.
“The economy appears to be close to the trough of the downturn,” the bank added. “Recovery, when it emerges, is likely to be gradual and moderate.”
Standard & Poor’s Ratings Services said on January 26 that Irish banks were riskier than it previously thought and predicted “high credit losses.” S&P also reduced its ratings for Bank of Ireland and Allied Irish Banks.
The Government has already pumped €3.5bn into Bank of Ireland and Allied Irish Banks.
Finance Minister Brian Lenihan earlier pledged to pump more cash into the lenders after the NAMA buys €80bn in property loans from the banks at a discount.