Permanent TSB is no longer required to hold extra capital as a buffer against future economic shocks and loan losses as it is no longer viewed as being systemically important to the Irish banking system by the Central Bank, writes Geoff Percival.
In its annual review of macroprudential capital buffers, the Central Bank has set out extra capital requirements — to be phased in between July 2019 and the same month in 2021 — for six institutions.
Gone from this year’s list — due to its reduced loan book following the sale of its UK mortgage book — is Permanent TSB which is now not large enough to be considered a systemically important bank.
Like other European banks, Irish lenders identified as systemically important to the domestic economy, due to their size and market share, have to hold additional capital to increase their ability to withstand losses on their lending.
The Central Bank began applying the new rules in 2015 and last year added PTSB to its list, setting the amount of extra capital it had to set aside at 0.25% of risk-weighted assets from July 2019, rising to 0.5% a year later.
Permanent TSB, the smallest of the three domestically-owned lenders here and which is more exposed to the cost of regulation than its rivals, completed a deleveraging programme last year by selling the remains of its mortgage book in the UK.
Bank of Ireland and AIB must set aside at least 1.5% of risk-weighted assets by 2021, phased in by at least 0.5% in 2019 and 1% in 2020. The rates for those banks are unchanged from previous levels.
Ulster Bank and UniCredit Ireland’s requirements remain at 0.5% and 0.25%, by July 2021, respectively.
UniCredit’s Irish operation is mainly involved in structured finance and treasury activities.
Citigroup’s buffer has been raised to 1% by 2021 due to its increased importance since moving its European retail banking operations from London to Dublin in 2015.
Additional reporting Reuters