The fact that Irish banks do not require any further capital could tip Moody’s into upgrading Ireland’s sovereign credit rating.
Cantor Fitzgerald analyst Ryan McGrath said the announcement that none of the banks will need any further capital is what the influential ratings agency, which currently rates Ireland’s sovereign bonds as junk, wanted to hear.
“This is the final straw that breaks the camel’s back and causes Moody’s to upgrade Irish sovereign debt,” he said.
Mr McGrath said they had not been expecting the level of detail that had come out of the banks following the balance sheet assessment, but the news that the banks won’t need any further capital injected in them is the final piece of the picture for the ratings agency.
“We have been monitoring what Moody’s have been saying. We feel that they are softening towards Ireland. We thought that they really wanted further data on banks and capital.”
Mr McGrath believes we can expect an upgrade on Irish sovereign debt early in the first quarter of 2014. An upgrade in the rating of Irish debt is seen as crucial in attracting asian investors. Any upgrade would be a major boost for the country.
Central Bank governor Patrick Honohan said the bank wanted to do a stress test of the banks before the bailout exit. However, this was not possible because they would have had to do another round of stress tests as part of banking union and consequently risked “double jeopardy.”
However, the balance sheet assessment should only be seen as preparing the groundwork for the comprehensive review of the banking sector in 2014. Only when this review is complete will it be possible to gauge the health of the Irish banks.
All of the Irish banks declared that they were adequately capitalised following a Balance Sheet Assessment carried out by the Central Bank.
The statements mean the banks should be adequately capitalised to pass the European stress tests next year.
AIB said it would provide further detail in its annual reports which will be released in March of next year.
“AIB has been advised of the findings of this review which it will consider in the preparation of the bank’s year end Dec 2013 provisions and financial statements.
“Based on an initial assessment of the findings of the BSA, the bank believes it continues to be well capitalised and in excess of minimum regulatory requirements,” the bank said.
PTSB also said it would not require any further capital from the Government.
“The assessment focused, inter alia, on the sufficiency of provision levels and capital measurement at 30th Jun 2013 under incoming regulatory capital rules under the Capital Requirements Directive IV .
“Based on the communicated results the outcome confirms that the capital position of Permanent TSB plc is above minimum regulatory requirements,” the bank said.
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