Regulator to reveal bank funding levels

SOME much-needed clarification on the future of the banking sector should surface on Tuesday when the Financial Regulator is expected to announce the capital funding requirements of the banks that will be transferring loans to NAMA.

The regulator will reveal the funding levels the banks will need to reach by the end of the year after transferring assets to the Government’s ‘bad bank’.

Latest rumour has it that something between a 6% and 7% equity tier-1 ratio target is likely, although as high a level as 8% has also been mooted.

According to one analyst, a 6% ratio would be achievable by both of the main banks, AIB and Bank of Ireland, and would largely do away with talk of them having to be nationalised.

The analyst added: “We don’t think nationalisation is a probability at this point. The banks should be able to reach a 6% tier-1 ratio, but if the target turns out to be 8% by the end of the year, it could trigger a forced equity raising round for the banks, and their shares — in which there is some optimism at present — could tank and Government aid could be on the agenda again. A 7% target would also be achievable on the back of asset sales.”

On a whole, the next week is lining up to be if not a wholly pivotal one for the future of the Irish banking sector, then certainly one in which many key questions will be answered.

Ahead of the new capital requirement announcement, Monday is likely to see first details over the exact amount NAMA will pay for loans.

NAMA-related news, including exact discount figures for the loans from AIB, Bank of Ireland, Irish Nationwide and the EBS, is expected in the early part of next week, with ‘acquisition schedules’ for those assets from Anglo Irish Bank not anticipated until later in the week.

The actual transfer of assets to NAMA, originally scheduled for the end of March, now look set to commence over the Easter weekend. Some estimates have it that the institutions will be left with a combined €16 billion capital hole after transferring their bad loans to NAMA.

Meanwhile, Bank of Ireland announced yesterday that it will also publish its financial results, for the nine months to the end of last December, next Tuesday.

The bank’s ongoing restructuring talks with the EU have been in the news this week, with speculation that it may have to sell off part of its British operations over the next three years.

Next week is also likely to feature results from Anglo Irish Bank. Although, unconfirmed, Wednesday is looking like the day when the troubled bank will publish the worst financial results in Irish corporate history, with loan losses of as much as €14bn expected in some quarters.