Elderfield says banks need up to €4bn over next six years

IRISH BANKS will need up to €4 billion more over the next six years to meet international rules on the levels of capital they must hold, the deputy governor of the Central Bank Matthew Elderfield has said.

In an interview with German newspaper Boersen-Zeitung, Mr Elderfield said the banks would require a further €3 billion-€4 billion to meet the international capital rules but he hoped the banks would be able to raise this funding themselves from profits.

“In the medium term they will certainly need more capital, if only because of the stricter international capital requirements,” he told the German newspaper.

“With regards to measuring capital and the question of which instruments count and which do not, the institutions must go even further,” he added. “In the coming five to six years the Irish banks should need a further €3-€4 billion.”

Mr Elderfield said that good progress was being made on the stabilisation of the lenders but that “the banks also need more time to check their credit portfolio”.

“They are not as far as they should be, their operative ability is not as strong as it could be.”

Banks will have to increase higher capital levels gradually to satisfy the so-called Basel II international banking rules by 2019.

A spokesman for the Central Bank said yesterday that the goal was for the Irish banks to meet “more rigorous requirements through improving profitability through the transition period”.

Mr Elderfield was expanding in the interview on comments he made in a speech in March when he said that the sooner the banks were profitable again, the better they would be able to meet medium-term capital targets, ideally from raising cash in the markets.

Asked last week if the banks would require further capital to cope with the mortgage crisis, Central Bank governor Patrick Honohan said they had no immediate need for further cash but would require capital over time to meet higher standards being set for banks internationally.

The Government is injecting €64 billion into the Irish banks and has taken control of five of the six domestic financial institutions.