Concern over PTSB after Draghi says Irish banks have outstanding issues

Fresh concerns have been raised over the future of Permanent TSB following comments made by ECB president Mario Draghi to the Fianna Fáil finance spokesman.

In a letter to Michael McGrath, the head of the ECB highlighted a number of challenges still facing the banking sector, including, “ensuring the viability of all nationalised banks”.

Mr McGrath said he was “deeply concerned” by what Mr Draghi had to say.

“I can only assume that the ECB president’s remarks are a pointed reference to state-owned Permanent TSB,” said Mr McGrath. “His comments should be interpreted alongside the fact that a restructuring plan for Permanent TSB was first submitted to the European Commission in June 2012 and still has not been approved.”

PTSB is still loss-making and is not scheduled to return to profit before 2017. According to its restructuring plan, it will be carved up into a good bank and an asset management unit that will be responsible for winding down its bad assets.

A PTSB spokesman said the finance minister has consistently cited PTSB as being an important part of the Irish banking sector.

The Central Bank said PTSB was sufficiently well capitalised following the Balance Sheet Assessment it conducted last November.

However, the state-owned bank will have to undergo further rigorous tests this year as part of the ECB’s Comprehensive Assessment of the banking system.

Mr Draghi noted that the ECB tests would be “different in nature” to the BSA.

“The ECB is clearly distancing itself from the Balance Sheet Assessments carried out by the Central Bank last year and is emphasising the point that the ECB stress tests later this year will represent a far more stringent test of the health of our banks,” said Mr McGrath.

The TD called on the Central Bank to release the full results of the BSA so there is much greater transparency on the health of the three Irish banks. Mr Draghi said it was up to the Central Bank if it wanted to release the results of the BSA.

However, the Central Bank said it had, “determined that as the BSA is part of the overall comprehensive assessment, with the findings being included in the assessment, the results of the BSA are not being published separately”.