Wednesday 17 January 2018

Banks may need 'more capital' to pass new tests

Noonan says lenders 'should have enough headroom' to cope with higher targets

Laura Noonan

FINANCE Minister Michael Noonan yesterday admitted that Ireland's banks might need to raise more capital to pass a new round of European stress tests, but said they "should" have enough "headroom" to cope with new targets.

The comments came as Mr Noonan briefed journalists on the outcome of the latest "review mission" by the European authorities and the International Monetary Fund.

At the same briefing, Mr Noonan revealed that any effort to cut the massive cost of Anglo Irish Bank's bailout would have to be agreed by all 27 EU member states and could not happen at this weekend's crunch Europe debt talks.

Mr Noonan declined to be drawn on speculation that the Government might try to get Europe's bailout fund to take over the state's stakes in AIB and Irish Life & Permanent.

But senior officials from the mission review team later appeared to throw their weight behind those efforts, saying they would "look at every possibility" to make sure that any changes to the bailout fund would benefit Ireland.

Over the last 10 days officials from the EC, ECB and IMF met the major banks, lobby group the IBF and the Department of Finance to get an overview of whether bank restructuring was hitting targets set in the bailout programme.

The ECB's Ireland mission head Klaus Masuch yesterday said there had been a "lot of progress" which created "a very good basis" for further improvements, while other officials said the banks' assets sales were progressing well.

Asked whether there had been conversations about further supports the Irish banks might need to hit any new European targets, Mr Noonan said the parameters for the new tests had not yet been laid down.

"There was some discussion that what was allowed [in the Irish stress tests] wouldn't be allowed [in the European ones]," he said. "We have a very strong interest in how that develops at the weekend."

He added, however, that it "looks like" the banks "should" have "enough headroom" to meet the latest tests. The banks were recapitalised to the tune of €24bn to meet stress test targets laid down by the Central Bank in March.

Mr Noonan declined to be drawn on the possibility of using Europe's bailout fund to take over the Government's €24bn investments in AIB and Irish Life & Permanent, saying any comments would be "speculation".

The new fund, the EFSF, is empowered to hold stakes in banks directly, but the current proposals only allow this to happen if both market and national resources have been exhausted. Terms may change at this weekend's talks.

Irish Independent

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