S&P: Banks lack adequate capital

The Irish banks probably have enough capital not to fail the ECB stress tests, but they do not have sufficient levels to start functioning normally, according to Standard & Poor’s Nigel Greenwood.

The credit ratings agency upgraded the sovereign credit rating to A- from BBB+ with a positive outlook last Friday, but retained a negative outlook on five Irish banks — Bank of Ireland, AIB, Ulster Bank, KBC Ireland and Permanent TSB — during the week.

Irish banks face ECB stress tests later this year as part of the Comprehensive Assessment of the banking system. Mr Greenwood, a director of financial institutions ratings at S&P, who was speaking at a briefing in Dublin yesterday, said that these banks will probably have enough capital to get through the stress tests, but they are well shy of the capital needed to return to robust levels of lending.