Stand for Richie Boucher's 'Eugene Sheehy' moment
Sunday November 29 2009
WILL this week's appearance before the Oireachtas Finance and Public Service Committee prove to be Richie Boucher's Eugene Sheehy moment? By declaring that Bank of Ireland wouldn't need any more capital from the state, Boucher left an awful lot of hostages to fortune.
On the face of it, Bank of Ireland seems to have weathered the storm much better than AIB. The €6.9bn it expects to write off in the three years to March 2011 compares very favourably with the €7.1bn AIB will have written off by the end of this year.
This week, ratings agency Standard & Poor's announced that it was revising the way it calculated the amount of capital required by the world's banks, including our very own AIB and Bank of Ireland. In future, S&P will disregard so-called "hybrid" capital and quadruple the amount of capital banks need to cover their trading desks.
Both AIB and Bank of Ireland suffer badly under the new system with S&P's reckoning that AIB was the sixth most vulnerable bank surveyed and Bank of Ireland doing only slightly better in 10th place. These dismal placings make it almost inevitable that both AIB and Bank of Ireland will be downgraded once more by S&P in the months ahead.
This will further increase the pressure on both banks to raise fresh capital. In the current market, that capital can only come from the State.
Boucher could end up regretting this week's words sooner rather than later.
Originally published in
