Noonan says results reaffirm banking system’s robustness

Minister for Finance Michael Noonan

said the stress tests reaffirmed the robustness of the Irish banking system notwithstanding the failure by Permanent TSB.

He said the examinations of the balance sheets of each bank had demonstrated that significant progress had been made by Irish institutions since 2011.

In relation to the ECB, he said Permanent TSB was preparing a capital plan to prepare to raise the funds required to meet the shortfall identified. Later the Minister of State for Finance Simon Harris said he expected PTSB to provide the plan within the next two weeks.

"The results show that the three banks into which the Irish taxpayer has invested [AIB, Bank of Ireland and PTSB] had sufficient capital at the end of 2013 to meet the asset quality review and the baseline stress scenario," said Mr Noonan.

“Under the adverse stress scenario again both AIB and Bank of Ireland were sufficiently capitalised. However, Permanent TSB showed a capital requirement. This will be fully addressed by its capital plan.”

Capital plan

Mr Harris

said the Government would make a “judgement call” on its role in the funding scenario once the capital plan was submitted. The two priorities of Government were to protect taxpayers’ investment and to ensure a stable banking sector.

Turning to AIB, the vast majority of which is State-owned, Mr Noonan said: “The positive results for AIB are an important milestone and acknowledge that the bank is well capitalised. These results will allow my officials to move to the next phase of crafting our plans to return some of the large investments made between 2009 and 2011 to the taxpayer.”

Fianna Fáil finance spokesman Michael McGrath said the results "should herald a new era" in the sector in which it moved beyond retrenchment and began lending again.

“We’ve had six years of crisis management, asset sales and capital raising by the Irish banks. This has diverted the resources of banks from servicing the needs of customers. I regularly hear of the frustration of business customers unable to secure credit from banks whose attention has been focused on their own survival.”

Prudent lending

Mr McGrath said if the tests were to have value they should usher in an era of normalised activity where well capitalised Irish banks offer competitive and prudent lending products to their personal and business customers.

“As I have stated in the case of Permanent TSB, the State must ensure the bank plays a key role in promoting a competitive landscape. The State must also safeguard the value of its investment to date.”

In relation to the consultation process under way by the Central Bank on a 20 per cent deposit requirement for mortgages, Mr Harris said the Government had to learn from the mistakes of the past. Nonetheless, the Government had to make a judgement on whether 20 per cent was the right level for a minimum deposit.