Saturday 20 January 2018

Bank chiefs summoned to discuss stress-test findings

Laura Noonan

CHIEF executives at Bank of Ireland, AIB, Irish Life & Permanent and EBS have been summoned to meetings to receive "draft" findings of the latest banking stress tests.

The Irish Independent has learnt that executives from all four institutions have been invited to separate meetings with Financial Regulator Matthew Elderfield tomorrow morning. All the meetings will be held at the Central Bank's Dame Street headquarters.

Sources confirmed the meetings would feature "tough" conversations about the outcome of the Prudential Capital Assessment Review (PCAR) into how much more cash the banks need to have to deal with future losses.

The options around resolving the banks' massive dependence on cheap central bank funding, which is being covered by a separate Prudential Liquidity Assessment Review (PLAR) process, is also expected to be discussed.

The banks are expected to be given a relatively definitive picture of how their institutions have done in the PCAR exercise, where a bailout of between €7bn and €24bn could be required.

The liquidity review is more complex, since there is no clarity on whether the Government has reached an agreement with the ECB on a "medium-term" funding solution for the banks.

If a deal is struck with the ECB, then the Irish banks can be given a long period of time to sell off about €80bn of assets and reduce their dependence on ECB money.

But if the ECB doesn't agree to continue to support the banks, then institutions could be forced into a "fire sale" of their assets which could "realistically" trigger losses of €20bn, according to analysts at Davy.

Bank of Ireland will be sending in a senior team led by chief executive Richie Boucher, who is expected to push for clarity on how long the bank will be given to raise any extra capital demanded.

Irish Life & Permanent will be represented by chief executive Kevin Murphy and finance boss David McCarthy and a handful of other executives.

AIB's team will be led by executive chairman David Hodgkinson, while EBS's chief executive Fergus Murphy will also attend.

Spokespersons for all four banks declined to comment yesterday, pointing out that details of any meetings with the Central Bank were "confidential".

On Monday, the Central Bank said meetings with the chief executives would take place "later this week to discuss draft findings" of the PCAR and PLAR reviews.

The meetings may also feature some discussion of the new "fitness and probity" rules published by the regulator earlier this week, which could see bank bosses forced out if they were found to have "contributed" to their institutions' need for a state bailout.

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