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Wednesday 23 August 2017

Initial findings show lenders are unlikely to need more than €35bn

Laura Noonan

Laura Noonan

THE latest banking bailout will not exceed the €35bn provided for in Ireland's IMF/EU support package, the draft findings of the Central Bank's stress tests have shown.

The findings were given to Finance Minister Michael Noonan by Central Bank Governor Patrick Honohan and Financial Regulator Matthew Elderfield yesterday morning.

Chief executives of AIB, Bank of Ireland, Irish Life & Permanent and EBS were also called into the Central Bank and given draft findings relating to their own institutions.

Fears had been growing that the cost of the next bailout would top the €35bn allowed in the plan, but the draft findings have revealed a number significantly lower than that.

It is understood that the figure for AIB is the highest and may run beyond €10bn. Bank of Ireland is believed to need under €5bn, while Irish Life & Permanent and EBS are believed to need single billion sums.

Sources stressed that there was a "still a lot of work to be done" and that many issues had yet to be resolved. "They did give us a number, but they also gave people an opportunity to challenge assumptions that had led to the number," said one source.

Data

Bankers are planning to work on their data over the weekend, when there is also likely to be further engagements with teams from the Central Bank.

The meetings are understood to have largely focused on the capital assessment, dubbed PCAR, which look at the losses the banks would suffer if the economy worsens.

A separate exercise is looking at ways to slim down the banks' operations so they will no longer be dependent on €150bn last-resort money from the ECB.

Sources said there was widespread agreement that the banks would not have to sell off swathes of assets quickly, something that would have led to massive losses.

The banks will instead have to separate out about €80bn of losses from their main businesses -- the exact structure for doing this has not yet emerged.

Irish Independent

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