Central Bank seeks loan report changes

THE CENTRAL Bank has asked the guaranteed banks to change how they report impaired loans so that they identify losses on loans as early as possible.

The regulator yesterday published guidelines to compel the banks to take a more conservative and consistent approach to impaired loans to account for the higher loan loss estimates in the Central Bank’s stress tests of March 2011.

Bank of Ireland, AIB, EBS, Irish Life and Permanent and Irish Bank Resolution Corporation, formerly Anglo Irish Bank, are being asked to revise their impairment triggers for each loan portfolio “to ensure the earliest possible recognition of losses” in line with international accounting rules.

They were also told to “significantly improve” their disclosures on loan quality and credit risk management.

“We want to see financial statements prepared on a more conservative basis, with the impairment provisioning methodologies better aligned to economic realities,” said the Central Bank’s director of credit institutions supervision, Jonathan McMahon.

“We also want a greater number of higher quality disclosures,” said Mr McMahon.

The changes “ought, over time, to encourage greater confidence in published financial statements” from the banks, he said.