Friday 23 March 2018

The dash for cash on banks' balance sheets

The global financial crisis has prompted regulatory authorities around the world to push for banks to hold more cash in reserve on their balance sheets in future.

The aim is to leave banks better able to withstand future shocks.

But the newly appointed financial watchdog Matthew Elderfield is pushing for Ireland's banks to hit higher capital levels at a faster pace than had been expected.

Mr Elderfield is demanding the banks raise enough equity this year so that they will have no less than 7pc of their assets held in reserve.

They must take into account multi-billion euro discounts on their NAMA loans and future bad loan losses on their remaining loans.

He also wants the banks to make sure they do not fall below a 4pc level following a massive stress-testing of their non-NAMA loans against much worse unemployment and house price figures than economists are currently predicting, and a weak economic backdrop.

Irish Independent

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