Monday 5 December 2016

Taxpayer hit with bill of €30m for stress tests

Costly and 'gigantic assignment' found no new problems in banks

Published 08/05/2011 | 05:00

TAXPAYERS will be hit with a bill of €30m to pay for the 'stress tests' carried out on Irish banks by US financial consultants Blackrock Solutions and six other contractors, the Sunday Independent has learned.

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Commissioned by the Central Bank on January 6 last to forecast the banks' future loan losses and assess their future capital requirements, Blackrock took just 12 weeks -- with the assistance of experts from Barclays Capital and Boston Consulting -- to complete what Blackrock chairman and chief executive Larry Fink described at the time as a "gigantic assignment".

The three companies received additional professional support from seven Irish firms, according to a Central Bank spokeswoman. Among those who assisted in the stress-test exercise, which was required under the terms of our so-called EU/IMF bailout, were accountants Ernst & Young and the legal firms Arthur Cox and Matheson Ormsby Prentice.

Ernst & Young's retention for the task of checking data integrity and verification for Bank of Ireland during the stress tests is especially interesting when one considers its role during the boom as auditors for Anglo Irish Bank.

Arthur Cox's engagement as legal advisors for the costly exercise, meanwhile, merely represents the solicitors' latest big pay day courtesy of Ireland's already overburdened taxpayer.

Indeed in its third quarterly report for 2010, Nama disclosed payments to the Earlsfort Terrace based legal eagles of €1.1m for legal services it provided.

Asked by the Sunday Independent to provide a breakdown of the payments being made to Blackrock Solutions and the other consultants it employed for the stress tests, the Central Bank's spokeswoman said it would not be possible as the figures had not been finalised yet.

The spokeswoman was able to say that at its 'peak', a total of 100 personnel from the 10 outside firms had been working alongside between 60 and 80 of the Central Bank's employees.

Whatever individual amounts are now due to Blackrock and the other contractors, a simple division of the €30m bill reveals a per diem cost to the taxpayer of €500,000 over the course of the 12 weeks in which the stress costs were conducted.

While the Central Bank might insist that it got value for money, writing in his column in the Irish Times following the stress test results publication last month, former Taoiseach Garret FitzGerald remarked that while the strictness of the stress tests would "command the respect of the markets", they had revealed "no new problems with the banks".

And while that may not have been intended as a criticism of the stress tests, or indeed those who conducted them, taxpayers may well take a different view.

Sunday Independent

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