Wednesday 13 December 2017

Central Bank rules out more funds for Anglo and Nationwide

Laura Noonan

THE Central Bank yesterday ruled out another imminent bailout for Anglo Irish Bank and Irish Nationwide after an external review of the duo's books found they had already made "appropriate" provision for future loan losses.

The news came even though the review of Nationwide threw up €74m of extra losses after testing the bank against 'stressed' losses three times as severe as those expected at AIB, Bank of Ireland, Permanent TSB and EBS.

The verdict on the institutions' loan losses was delivered by consultants BlackRock, the high-powered US firm that carried out the 'stress tests' for AIB, Bank of Ireland, EBS and Irish Life & Permanent earlier in the year.

The two institutions have already been ear-marked for combined bailouts of €34.7bn, but the EU/IMF programme left the State headroom to stump billions more into the pair if an independent review showed further losses.

In a statement, the Central Bank also revealed that BlackRock put Irish Nationwide through a full stress test and conducted a "reasonableness" review of previous work done on the Anglo Irish Bank loan book.

It is understood the process for Anglo -- which drew criticism from some observers last night -- was approved by the European authorities and the International Monetary Fund late last year.

In a press statement, the Central Bank said recent reviews were "enough to deem a full BlackRock exercise unnecessary", since the Central Bank had overseen those reviews as recently as last September.

BlackRock's assessment of the "reasonableness" of the previous reviews found "that the previous results remain reasonable and within the ranges BlackRock devised from its analysis", the Central Bank added.

BlackRock modelled loan losses of up to 31pc on Nationwide's portfolio -- in the March stress tests, loan losses of an average of just over 10pc were modelled across AIB, Bank of Ireland, EBS and Irish Nationwide.

The losses modelled for Nationwide were over the "lifetime" of the loan whereas losses for the other four banks were assessed over a four-year period but the difference between Nationwide and its peers is striking.

The 'stress' scenario for Nationwide translates to losses of €793m -- higher than the €719m used by the Central Bank last September -- but the difference was not enough to trigger a higher capital demand.

In its statement, the Central Bank said BlackRock had concluded the September loan loss figures "remain robust".

BlackRock's work was also audited by Boston Consulting, which deemed the latest review "sound and appropriate".

Irish Independent

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