Honohan upbeat on AIB and BoI fund targets

CENTRAL Bank governor Patrick Honohan has expressed his confidence in AIB and Bank of Ireland meeting their end of year post-NAMA funding requirement targets and, thus, passing their current EU stress tests – the results of which are due at the end of next week.

He said that the European stress tests should go some way towards removing “exaggerated concerns about some risks” and “have the promise to move things forward”.

“We expect that the banks will meet the capital requirements set out by us, which we believe are sufficient to withstand future stress scenarios,” he added, also saying that the Irish stress tests that both banks have already met were more stringent than the EU versions. He also said that the current bank guarantee scheme, due to run until December, may overrun for a few months but would be wound down over quarters rather than years.

AIB is in the midst of attempting to raise €7.4 billion by the end of the year, while Bank of Ireland has already effectively met its €2.7bn target.

Mr Honohan was speaking at the publication of the Central Bank’s annual report yesterday. This showed that the body made a profit of €933.8m last year, compared with a profit of €364.2m in 2008. Some €745.5m of the 2009 profit will be paid to the exchequer, nearly €500m more than was the case the previous year. Yesterday’s report publication – the last before the merging of the Central Bank and Financial Regulator’s office as the Central Bank Commission later this year – coincided with the publication of the bank’s strategic plan going from this year to 2012.

The main aims of the plan include the introduction of a new consumer protection code and the implementation of a 100% charge-back arrangement regarding the costs to industry, in a bid to reduce costs to the taxpayer.

The plan is also promising the new commission will have a closer working relationship with new EU supervisory bodies, such as the European Systemic Risk Board and the European System of Financial Supervisors and greater interaction with domestic bodies such as the various universities, the Economic and Social Research Institute (ESRI) and the wider public service.

Mr Honohan also said yesterday that Anglo Irish Bank’s revised restructuring plan of a split into a working bank and an asset management company to manage its non-NAMA bound loans – which is due to cost an estimated €22bn – is more realistic and a lot more credible than its original plan.