The governor of the Central Bank Patrick Honohan has said the banks are adequately funded and there was no immediate need for further recapitalisation of the sector.
Mr Honohan was speaking at the publication of the Central Bank’s 2011 annual report and was responding to a reference to a report — published last week by Deutsche Bank — speculating that Irish banks might need between €2bn and €4bn in extra funding, which could lead to the country requiring a second bailout.
The Central Bank is set to carry out another round of stress tests on domestic banks in 2013 and, while Mr Honohan said there were “a lot of issues for bank capital in the years ahead”, he claimed that there was “no immediate need for extra capital for the banks”.
At yesterday’s briefing, Mr Honohan refused to directly comment on the potential impact on Ireland of a Greek exit from the eurozone.
“The first objective of the Central Bank is to promote financial stability in the Irish economy and that is what we’re doing,” he said.
However, Mr Honohan intimated that it is still too early for commentators to talk about “Plan B” scenarios for the future of the Irish economy and second bailout agreements, given that the country was still a year-and-a-half away from aiming to exit its existing bailout programme and looking to get back into the bond markets.
On that note, the governor also expressed his disappointment at the interest rate/yields connected with government bonds remaining high.
He said the high yields were “still unfavourable”, something which he said was “somewhat disappointing”.
However, after noting that much of the reasoning was down to external wider eurozone issues, as opposed to domestic banking woes he commented that it would be “a huge leap” to interpret his disappointment on the issue to mean a second bailout for Ireland was needed.
On a separate note, when asked about the ongoing debt issue relating to the former Anglo Irish Bank, Mr Honohan said that it would be “valuable” to have a longer-term resolution in place, rather than have an ongoing debate about annual payment tranches.
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