Central Banks sets new capital requirements for AIB, BOI, ILP & EBS

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Prudential Capital Assessment Review (“PCAR”)​

1. The Central Bank has set a new minimum capital requirement for Allied Irish Bank, Bank of Ireland, ILP and EBS of 10.5% Core Tier 1. In addition, the Central Bank is requiring these banks to raise sufficient capital to achieve a capital ratio of at least 12% core tier 1 by 28 February, 2011 in the case of AIB, BOI and EBS and by 31 May 2011 in the case of ILP.

2. The Central Bank will require this additional capital to be in the form of equity (or equivalent instruments for EBS).

3. The total capital injection will be €8bn. This figure takes account of the capital impact of further NAMA transfers (see below). This action, along with early measures to support deleveraging, will result in an injection of €10bn of fresh capital into the banking system, above and beyond that already committed.

4. Bank of Ireland, Allied Irish Banks, ILP and EBS will be subject, as previously announced, to a stress test in March 2011 under the Central Bank’s PCAR methodology. If, as a result of the PCAR, banks are assessed to be at risk of falling below the 10.5% core tier 1 target then further capital injections will occur.

5. The PCAR will be enhanced by the inclusion of a detailed review, to be conducted by an independent third party, of asset quality in the participating banks. In addition, an independent third party will review the quality of the data banks submit for the PCAR.

6. The Central Bank will conduct a review of the adequacy of provisions in Irish domestic banks. Where required, banks will be required to increase provisions to take account of asset performance.

Prudential Liquidity Assessment Review (“PLAR”)​

7. The Central Bank will perform a PLAR for Bank of Ireland, Allied Irish Banks, ILP and EBS in Q1 2011. The PLAR will set bank specific funding targets consistent with Basel III and other international measures of stable, high quality funding.

8. To meet PLAR targets, and also to maximise the efficient utilisation of capital through Risk Weighted Asset (“RWA”) reductions, the Central Bank will require Bank of Ireland, Allied Irish Banks, ILP and EBS to put in place detailed asset disposal plans by end-April 2011. These plans will identify measures banks will take to dispose of non-core assets and/or securitize other assets. If required, credit enhancement will be provided by the State.

9. In addition to work the banks undertake, the Central Bank will retain specialist advisors to identify further disposal or securitization measures.

10. The remaining land and development loans of <€20mn will transfer from Bank of Ireland and Allied Irish Bank to NAMA by end-Q1 2011.

Anglo Irish Bank and Irish Nationwide Building Society

11. The restructuring of Anglo Irish Bank and Irish Nationwide Building Society will be swiftly completed by the Department of Finance with the support of the Central Bank and submitted for EU State aid approval.

Special Resolution Regime (“SRR”)​

12. The Central Bank will continue its preparations for the introduction of the SRR in early 2011.

Credit Unions​

13. A significant strengthening of the regulation and stability of the credit union sector will be carried out by end-2011. These measures will be based on the results of the Central Bank’s loan book review, the Central Bank’s sector-wide stress test and the outputs of the Strategic Review of the credit union sector.
 


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Other highlights from Central Bank Statement:

AIB is now required to raise an additional €5.265bn Core Tier 1 capital. Taking account of the capital AIB has still to raise under its capital plan, the bank has now to raise €9.765bn of Core Tier 1 capital by end-February 2011.
BOI is now required to raise an additional €2.199bn Core Tier 1 capital by end-February 2011.
EBS is now required to raise an additional €438m Core Tier 1 capital.
ILP is now required to raise an additional €98m Core Tier 1 capital.
 

Dreaded_Estate

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If we don't get in external money this

-AIB at 97% state ownership

-BOI at close to 75%
 


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