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Central Bank to update bailout cost

UPDATED estimates for the massive cost of bailing out Anglo Irish Bank and Irish Nationwide are set to be published at the end of April after the Central Bank finishes a fresh review into the institutions' finances.

The Irish Independent has learned that the European authorities and the IMF have agreed to exempt Anglo and Nationwide from March's round of banking stress tests.

But a spokesperson for the Central Bank of Ireland confirmed that the two institutions' books are being actively examined so an assessment of their financial positions can be delivered at the end of April.

The most recent estimates put the cost of bailing out Anglo at between €29bn and €34bn, while the smaller Irish Nationwide has cost the taxpayer €5.4bn.

The April announcement will either validate these estimates, or update them.

The current review is examining Anglo and Nationwide separately, even though they have submitted a joint business plan to the European Commission and are expected to be wound down as one entity.

Anglo went through the last round of stress tests, dubbed PCAR, in March 2010.

Its books were also interrogated in September, when the Central Bank put the final cost of bailing out Anglo at between €29bn and €34bn.

"BlackRock [the international finance firm] is reviewing this September assessment to validate that the conclusions remain sound," a spokesperson for the Central Bank said.

She declined to be drawn on whether the range for Anglo's final cost could "narrow" or whether the bailout cost could be revised to reflect the deterioration in Ireland's economy since September.

Irish Nationwide has never been through a formal stress test and the Central Bank did not give any commentary on the building society's outlook in its September statement on banks' capital.

BlackRock has now been engaged to "conduct a high-level review of asset quality and data validation" at Nationwide, the Central Bank confirmed.

Crucially, both Nationwide and Anglo will not have to meet the higher capital targets set for the "continuing" banks under the bailout plan.

AIB, Bank of Ireland and Irish Life & Permanent must all have so-called 'core tier one' ratios of 12pc, so they have to have €12 of easily-accessible equity for every €100 they've loaned out.

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Anglo and Irish Nationwide must only hit a core tier one ratio of 8pc. Draft figures for Anglo showed it had a core tier one ratio of 11pc at the end of December. Recent figures for Nationwide are not available.

The three continuing banks were originally supposed to hit the 12pc target by the end of February, but the external authorities agreed to give Ireland an extension.

Sources on the continent stressed that while the decisions on the recapitalisation of the banks could be deferred to the new government, the extension was not indefinite.

"Ireland has the resources to recapitalise its banks and it is important that this delay is temporary and the Irish authorities recapitalise the banks as agreed under the programme," the bailout troika said after the extension was agreed.

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