Central Bank opens up but key figures elusive
IN exactly two weeks' time, markets will be eagerly devouring the results of the 2011 stress tests, deciding whether the latest picture of Irish banks' future losses is credible and palatable, and buying and selling based on the answer.
Until then, the money men have yesterday's advance disclosures from the Central Bank to trade on, plus some further information which will be unveiled by the European Banking Authority (EBA) tomorrow.
The first thing that must be acknowledged about yesterday's disclosures is that they shed light in places where light has never been shed before.
Ahead of the first stress tests last March, the various doomsday scenarios pencilled in were anyone's guess.
Even after the results of those stress tests were published, information around the actual "stresses" or shocks that were modelled was relatively thin on the ground.
The "delayed economic recovery" scenario, for instance, included "negligible" economic growth in 2011 and 2012 plus a "cumulative" 24.8pc fall in house prices over 2010 and 2012 and "other parameters".
Yesterday's dispatches are far more detailed and to the point. Exact figures are given for "baseline" and "adverse" developments in growth, consumption, investment, exports, imports, house prices, commercial property prices, employment rates and a host of other factors in 2010, 2011, 2012, 2013.
The unprecedented level of disclosure had been broadly signalled by transparency enthusiast and Central Bank governor Patrick Honohan, but was welcomed by the market nonetheless.
The most talked about figures, though, were the ones that weren't there.
"I'd really expected to see something about interest-rate stresses," says Dermot O'Leary, chief economist at Goodbody's, pointing out that the prevailing interest rates will have a big impact on banks' abilities to lend profitably and on borrowers' abilities to repay loans.
Others grumbled about the lack of detail around the stresses applied to sovereign bonds held by the banks. That question will be dealt with tomorrow though, since the EBA will publish the sovereign treatment for all European banks and Ireland has committed to falling into line with Europe.
The other striking omission is data around the stresses applied to mortgage loans, the portfolio which many believe is most at risk. The "original" stress tests included loan loss ratios of 5pc on mortgages -- yesterday's communique made no disclosure at all, though predictions around things like unemployment address the issue in an indirect way.
The Central Bank could argue that Rome wasn't built in a day, that they've made massive strides in transparency and that every disclosure is invariably going to come up against an insatiable market appetite for yet more information.
Whether that line will cut any ice with the market remains to be seen, though the share prices of Irish banks over the coming days might give some indication.