Monday 24 October 2016

Permanent TSB and other small lenders face fresh stress tests

Published 20/10/2015 | 02:30

Single supervisory mechanism boss Daniele Nouy details plans for stress testing banks
Single supervisory mechanism boss Daniele Nouy details plans for stress testing banks

Permanent TSB and other smaller lenders will be subject to "non-public" stress tests next year, despite falling outside the scope for review of the strength of Europe's biggest banks.

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The European Central Bank's new unit for overseeing banks, the single supervisory mechanism (SSM), is to carry out a separate round of stress tests for banks that fall under its supervision.

However, this will not be part of the European Banking Authority's (EBA) stress testing of the big lenders, SSM chief Daniele Nouy told the European Parliament yesterday.

Fine Gael MEP for Dublin Brian Hayes said it means Permanent TSB could face another round of stress testing as soon as the first quarter of 2016.

"Ms Nouy explained to the Economic and Monetary Affairs Committee that Permanent TSB could be one of the banks to be stress tested next year," according to Mr Hayes.

As a relatively small bank Permanent TSB had been expected to escape previously flagged stress tests likely to take in AIB and Bank of Ireland.

"It is welcome that PTSB, and indeed other Irish banks, could be subject to more stress testing.

"It is important that Irish banks get back to profitability but we need to ensure that banks which have encountered problems can cope in a stressed environment," Mr Hayes added.

Stress tests have become increasingly frequent in Europe since the banking crisis and aim to help officials understand the vulnerabilities of systematically important lenders.

Permanent TSB was the only Irish lender forced to raise capital after coming up short in the most recent round of European stress tests in 2014.

It plugged the cap by selling assets and raising money through a share sale.

"PTSB has made significant efforts to resolve its capital shortfall of €850m which was identified through SSM stress tests in 2014.

"With the Irish economy growing at the fastest rate in the EU, PTSB can take advantage of the positive conditions to attract more investors," Mr Hayes said.

Daniele Nouy said that while the EBA's formal round of bank health checks would involve 50 to 60 of the biggest lenders, smaller institutions will also be looked at.

"The banks that will not be picked for the EBA stress test, will have some kind of stress test under the SSM in a non-public fashion... to assess the need for capital requirements, she said. "It will not be a public exercise."

(Additional reporting Reuters)

Irish Independent

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