Bank stress tests - Full extent of problem laid bare

Yesterday’s announcement of the result of the Central Bank’s stress tests into the country’s banks was designed to boost confidence by providing a realistic insight into the extent of the financial problems facing the country.

The tests essentially envisaged bad case scenarios “on a scale that is unlikely to occur,” according to the Central Bank governor Patrick Honohan.

The report indicated that a further €24 billion will have to be pumped into the banks, confirming the growing suspicions that the true financial plight of the banks had been grossly underestimated. The latest move is essentially the fifth round of bank bailouts since October 2008, when then Finance Minister Brian Lenihan announced the process would cost €1bn over 10 years. This was categorised as the cheapest bank bailout in history. The extra €24bn announced yesterday will bring the total cost of bank bailouts to €70bn.