Business

Monday 28 July 2014

Several issues yet to be addressed in Irish banking system - ECB warns

Colm Kelpie

Published 24/03/2014|12:47

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SEVERAL outstanding issues remain to be addressed in the Irish banking system, the head of the European Central Bank has warned.

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These include tackling the large amount of bad loans and driving through reforms and restructuring within the banks, he said.

Mario Draghi’s comments were contained in a letter to Fianna Fail’s finance spokesman Michael McGrath, who wrote to the ECB boss earlier in the year.

“Resolving these issues will be crucial in order to ensure the emergence of a sound banking sector that will support the domestic economy in the coming years,” Mr Draghi wrote.

AIB, Bank of Ireland, Ulster Bank and Permanent TSB will be stress-tested as well as the Irish-based operations of global bank Merrill Lynch as part of European-wide stress tests carried out by the ECB later in the year.

The stress test process is aimed at uncovering any hidden risks or losses in the banks by the end of October, before the ECB takes responsibility for overseeing them in November.

Domestic Irish banks went through so-called asset quality reviews (AQR) late last year as a prelude to the main tests.

Mr Draghi pointed out that the stress tests this year will be different from the AQR.

Mr Draghi said any further details on the results of the AQR would have to be released by the Central Bank.

Last week global ratings agency Moodys warned some of the state’s banks may have to impose losses on creditors if capital shortfalls are exposed.

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