AIB says delay may allow consideration of stress tests

REACTION:ALLIED IRISH Banks said yesterday the Government decision to delay further recapitalisation until after the election may allow consideration of the next round of stress tests before further money in injected.

The Central Bank is currently carrying out two sets of stress tests to ensure how much capital the banks will need over the medium term.

The Prudential Capital Assessment Review (PCAR) and the Prudential Liquidity Assessment Review (PLAR) are expected to be completed by the end of March, which is a month after the end of February deadline for the next round of recapitalisations. All the deadlines are set out in the assistance programme agreed between Ireland, the EU and the IMF.

From the perspective of the two banks it would be preferable to know the results of the stress tests before they tried to raise further capital. Investors will be reluctant to inject money into the banks without first knowing the results of the PCAR.

“The short delay may also allow time to consider the outcomes of the Prudential Capital Assessment Review,” said AIB in a short statement.

It was unclear from the response of the European Commission and the International Monetary Fund whether or not they would agree to the deadline being extended by as much as a month.

Bank of Ireland is in active discussions with the Government about measures that would tide it over until after the PCAR was complete. Of the two banks it has the most realistic prospect of being able to raise fresh capital from sources other than the State.

Bank of Ireland also made reference to the ongoing PLAR and PCAR in its statement, but did not raise the prospect of delaying the next round of recapitalisation until after they were completed.

“The bank continues to work actively, with its advisors, on initiatives to meet regulatory capital requirements through a combination of internal capital management initiatives, support from existing shareholders and other capital markets sources,” it said in a statement.

The bank will today announce the result of its latest capital management exercise which involves the buying back of Canadian dollar bonds.