Banks may have to raise new capital

The possibility of the domestic banks having to raise new capital following the ECB stress tests "cannot be precluded" even though AIB, Bank of Ireland and Permanent TSB all passed the Central Bank’s Balance Sheet Assessment (BSA) at the end of 2013, according to the IMF in its latest review of the Irish economy.

However, if a bank fails the stress tests, it could raise funds from the private markets. If this is not possible, the capital shortfall should be plugged using the ESM, said the IMF.

“If the supervisory risk element of the assessment identifies other issues, such as profitability or liquidity, staff considers these should be addressed over time in a manner that contains costs while firmly safeguarding financial stability,” it said.