Regulator reveals new capital requirements for banks

The Financial Regulator today revealed new capital requirements for some of the main banks covered under the government guarantee scheme.

A review of capital requirements for Allied Irish Bank, Bank of Ireland and EBS has resulted in the Regulator setting out a level of 8% of core tier 1 capital to be attained by these banks by the end of this year.

“This level of capital must be met after taking account of all future losses, from both NAMA and non-NAMA portfolios,” the Regulator said.

“This capital will be principally in the form of equity – a 7% equity requirement.”

The new requirements also mean that banks cannot go below a level of 4% core tier 1 capital in a severely stressed scenario, the Regulator said.

Reviews of capital requirements for Anglo Irish Bank, Irish Nationwide Building Society and Irish Life and Permanent are ongoing.

“These measures are a long term solution and should ensure that Irish banks move to a strong capital position as soon as possible to speed their recovery and that of the economy,” Head of Financial Regulation, Matthew Elderfield said.

“It is important that our banks move to a strong capital position as soon as possible and that we draw a line under the Irish banking crisis. Sufficient capital is an essential ingredient to ensure that banks can withstand future losses. We have applied a robust, realistic and prudent capital standard informed by our own detailed analysis and by emerging best practice internationally.”

“After a period of great uncertainty, these actions and announcements create a secure platform on which confidence will be built. While the costs that are today revealed are certainly significant, they are manageable and affordable for the Irish State,” Central Bank Governor Patrick Honohan said.

“They are certainly a necessary measure to put the banking crisis behind us and provide for a stronger economy.”

The capital requirements set by the Financial Regulator must be in place by the end of 2010. The institutions will be required to submit recapitalisation plans to the Financial Regulator within 30 days.