Irish banks conclude ECB stress tests talks

It is believed that the Irish banks have concluded their meetings with the ECB to discuss the comprehensive assessment of the banking system.

The heads of AIB, Bank of Ireland, Permanent TSB, Ulster Bank and Merrill Lynch’s Dublin operations were all in Frankfurt over the past few days and held individual meetings which lasted roughly three hours with ECB officials, according to people familiar with the situation.

The comprehensive assessment of the banking system consists of an asset quality review and stress tests, which will determine if banks are sufficiently well capitalised to withstand future losses.

The results of the comprehensive assessment will not be disclosed until the last weekend in October. The purpose of the meetings was to discuss the methodology used for each bank’s stress test and asset quality review.

If a bank is unhappy at how certain potential losses were calculated, then there will be a short period of consultation, said a source. They will also get a sense of how well they performed during the tests, but they will not receive any actual results.

If a bank fails the comprehensive assessment, then they will be expected to raise fresh capital to plug any shortfall. In the case of AIB and Permanent TSB, which are both state-owned, if they cannot raise capital from private investors, then the Government would have to stump up the funding.

None of the banks would comment as this process is subject to strict confidentiality rules.

“Any discussions at this stage are based on preliminary and partial information. No final results or information has been provided to the banks, so any information on potential outcomes of the comprehensive assessment at this stage is speculative and not based on final outcomes,” said the Irish Central Bank in a statement.

Under proposals for EU banking union, 85% of banks across the eurozone by value of assets will be supervised directly by the single supervisory mechanism. However, banks have to complete an intrusive health check before the SSM becomes operational.

The future of the banking system in the EU hinges on the credibility of this comprehensive assessment. Similar stress tests carried out in 2010 were seen as too soft.


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