Thursday 14 December 2017

Finance warns on banks' tough asset sales

Laura Noonan

Laura Noonan

BAILED-out banks came within a whisker of their 'deleveraging' targets in 2011 but will face a "more difficult time" slimming down their balance sheets this year, the Department of Finance has admitted.

The comments were made in a 'banking score card' published on the Department of Finance website yesterday. The document is dated January 2012 and is believed to have been presented to international investors. Banks have to slim down their balance sheets by close to €73bn over three years to meet targets imposed by the Central Bank's stress tests last year.

The three 'continuing' banks -- AIB, Bank of Ireland and Permanent TSB -- came up just €100m shy of their €32.2bn deleveraging target last year, the Department of Finance said.

"Market liquidity conditions could limit ability to execute transactions during 2012," the document added, noting the €1.5trn to €3trn of banking assets that could come onto the market Europe-wide this year.

Earlier this week, the Department of Finance insisted banks' deleveraging targets would remain in force despite efforts to change some of the other stress test demands imposed on the banks.

Yesterday's document also stressed the considerable improvement in Irish banks' funding over the last year, with their reliance on central bank support dipping to just under €110bn by the end of 2011 against the "low forecast" of €134bn given by the Irish authorities to the ECB.

The reduced reliance on central bank support was largely driven by deleveraging, but has also been influenced by a "stabilisation" in deposits towards the end of last year.

The Department of Finance said the banks are now targeting corporate deposits that would not be covered by the Government guarantee scheme, but admitted their success would depend "on sovereign risk considerations".

Just 15pc of the bailed-out banks' deposits are now from corporate sources, against 37pc in October 2009 and even more before the crisis hit in the autumn of 2008.

Irish Independent

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