The Minister for Finance Michael Noonan said today the results of the European Central Bank's stress tests "confirm the strength of the Irish banking system".
This was in spite of Permanent TSB failing the adverse scenario of the ECB's stress tests, with a capital shortfall of €854.8 million. The four other institutions in Ireland that were tested were given a clean bill of health.
“Permanent TSB is preparing a capital plan to fully address the capital shortfall identified in the adverse stress scenario,” Mr Noonan added. “This will contain a number of measures including a third-party capital raise to be executed in first half of 2015.”
The ECB today released the results of the comprehensive assessment for more than 130 banks, including five Irish institutions - AIB, Bank of Ireland, PTSB, Ulster Bank and Merrill Lynch International Bank.
Mr Noonan said the assessments were a “strict” examination of the banks’ balance sheets at the end of 2013 and demonstrate the “significant progress” that has been made by the Irish institutions since 2011.
“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.
“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.”
PTSB has two weeks to submit its capital raising plan to the Single Supervisory Mechanism in Frankfurt, which will assume control of financial regulation for the euro zone on November 4th, and nine months to raise the fund to plug the shortfall.
On the individual institutions, Mr Noonan said: “The release of these results should be supportive of the value of the State’s investments in AIB and Bank of Ireland.
“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.”
The State owns 99.8 per cent of AIB, which received a €20.8 billion bailout from taxpayers after the crash in 2008.
“Permanent TSB has made strong progress since the new management team was appointed in 2012,” Mr Noonan added.
“The results of the comprehensive assessment demonstrate that as of December 31st 2013, Permanent TSB was well provisioned for the risks in its balance sheet at that point in time and that it has sufficient capital for the baseline stress test scenario set out in the comprehensive assessment.
“Encouragingly, we have seen positive economic data in Ireland in late 2013 and in 2014 and Permanent TSB has made significant progress towards returning to profitability in 2014.
“In line with the requirements of the comprehensive assessment, Permanent TSB will submit a Capital Plan to the SSM [Single Supervisory Mechanism] detailing the deleveraging which was completed in 2014, demonstrating how it will generate capital internally and, to the extent required, raise capital from third party private sources within the timeframes set out by the SSM.
“I am supportive of Permanent TSB’s plans to raise capital from private investors given the taxpayers investment in the bank, the importance of the bank to the economy, its customers (performing and non-performing) and its 2,200 staff. “My officials will review any proposals made by Permanent TSB and will work with Permanent TSB and other stakeholders to ensure a successful execution of the capital plan.”
Mr Noonan also welcomed the fact that both Merrill Lynch International Bank and Ulster Bank had sufficient capital under the assessments.
