Monday 23 October 2017

Banking stress tests to be held in 2014

Noonan confirms assessment won't take place until after State leaves bailout, despite troika's wishes

Colm Kelpie and Donal O'Donovan

STRESS tests on the State's main banks will take place in the first half of 2014 and not before the bailout comes to an end this year, Finance Minister Michael Noonan has confirmed.

The troika had been pushing for the assessment to be carried out before the State leaves the bailout at the end of the year, but Mr Noonan said they would be held within six to eight weeks of a wider round of assessments carried out across Europe.

The tests are aimed at gauging the banks' financial health and the level of losses and future losses linked to defaulted home loans and property lending.

Outgoing Financial Regulator Matthew Elderfield said the tests would take place on a phased basis, with certain preliminary aspects due to take place by the end of the year.

It comes as the latest memorandum of understanding (MOU) between the Government and troika said a preliminary assessment of the banks' balance sheets will be carried out by the end of November.

Mr Noonan said the tests will be the final stage in exiting the bailout, but added he didn't expect further mission reviews after the end of this year.

"We would still hope to have the last mission at the end of this year," he said.

The memorandum says the stress test will be carried out "ahead of and in close proximity" to those conducted by Europe, with the same methodology used as by other states.

Mr Elderfield said the first phase will take place at the end of this year.

"We'll look at provisioning levels, risk models and that will feed into the asset quality review of the ECB and then the stress tests will come after that," he told the Public Accounts Committee (PAC).

While he said that there would be more losses in the banks and that more capital would be needed under international regulations, he would not say when this would take place.

The MOU also says the Government expects to finish the year with a cash buffer covering up to 15 months of future funding needs.

The document, which has been agreed with the troika, sets out targets to be achieved by Ireland before the end of the year, including those that need to be done before the next review in July.

The document said that the Government will report in June and September on the options for lowering the funding cost of tracker mortgages held by banks, and carry out an assessment of bank fees and how they compare with other jurisdictions.

Targets for restructuring SME debt are also under way and will be passed to the banks by the end of this month, while authorities will by the autumn announce at what stage water charges will be introduced in the final quarter of next year.

The Government also said it will be setting high-level targets for increasing the share of generic drug-usage in the medium term.

Irish Independent

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