Bank stress tests results: Upates

Thursday 31 March 2011 22.10
Enda Kenny - Spoke about 'clarity and purpose'
Enda Kenny - Spoke about 'clarity and purpose'

The Central Bank has published crucial stress tests on the Irish banks, which show that €24bn will need to be put into the banks to help them cope with potential losses.

Central Bank Report | Watch Live | Michael Noonan Statement

Main points:

  • A total of €24bn needed for Irish banking system
  • AIB will need €13.3bn
  • Bank of Ireland will need €5.2bn
  • EBS will need €1.5bn
  • Irish Life & Permanent will need €4bn

2102 Davy Stockbrokers said the last and still critical piece of the puzzle is funding and how the Irish banks will be funded in the period of deleveraging.

2035 In a statement, Bank of Ireland said the measures taken today would mean the bank would ensure a sustainable, robust future for Bank of Ireland. Read the full statement here.

2003 The ECB has released a statement, announcing it will suspend the application of the minimum credit rating threshold for Ireland. Read the statement.

1952 Reorganisation of the banks will result 'in a loss of employment' as it should result in 'significant reductions in operating costs for banks' according to the Department of Finance.

1949 In a statement, the ECB, EC and IMF said the measures taken by Ireland were a major step forward in returning the banking system to health.

1924 When asked about reports he was looked upon as 'cocky and arrogant' at the EU summit last week, Enda Kenny said he was 'refreshing and very different', and disagreed with reports by Channel 4 News that he did not perform well at the meeting.

'We will make a diplomatic onslaught,' he added.

1921 Watch the video of the Central bank news conference here.

1913 Michael Noonan said he saw outside banks becoming a third pillar of the Irish banking systems.

He said Bank of Ireland had until June to deliver private investment and make progress with subordinate bond holders, and, if successful in that they will not be majority owned by the state.

But Mr Noonan said if unsuccessful it would become a State-owned bank like AIB.

1905 Enda Kenny said this was the scale of the legacy that Ireland now faced. He said the stress tests were performed by a reputable company, and he expected the tests would stand up.

Mr Kenny said the ECB was meeting to study what has been announced, he said he spoke with Jean Claude Trichet this morning about the issue and said he pointed out the decisions made by the Government to bring about a functioning bank system.

1902 Enda Kenny said the Government made a decision not to raise the issue of Ireland's position in the EU/IMF deal until the stress test results were clear.

He said in conversations and negotiations on the deal, the tests will bring clarity and purpose to the negotiations. He said the negotiations will now take place knowing what the end figure is.

He said the tests allow the Government to intensify negotiations with the EU and the ECB.

1855 Minister for Public Expenditure Brendan Howlin said the Government looked for the clearest, accurate picture of the requirements of the banks.

He said the division of the new pillar banks into the most pivotal and core parts of the system, needed for the recovery of the economy, is the map of recovery for Ireland.

1854 Tánaiste Eamon Gilmore said the Government had faced up to the challenges facing the country.

Watch live here.

1852 He said the decisions announced today were necessary.

1851 He said there would be a 'managable pace of bank deleveraging'.

Mr Kenny said after just three weeks in power his government had 'drawn a line over the failed policies of the past'.

1848 Taoiseach Enda Kenny said there is no point playing down the scale of the problem, or the extent of the crisis that we face.

He said the previous government 'dithered' in the face of the crisis.

1845 A news conference at Government Buildings is just getting under way. Watch live here.

1837 Mr Noonan said the priority is to get Ireland growing again, and if this was done then the level of debt Ireland has would be sustainable.

1836 Mr Noonan said there would not be a formal structure through while medium-term funds would flow, but there was an understanding on which Ireland would have access to medium term funding.

1833 On the subject of burden-sharing, Minister for Finance Michael Noonan said the ECB would not change their policy in regard to senior bondholders.

1830 Michael Noonan is speaking on RTÉ's Six One News now.

1825 Patrick Honohan: 'I don't like to use the word guarantee, because guarantees are what got us into this trouble.'

1823 Watch Minister for Finanace Michael Noonan's Dáil statement here.

1819 Minister Noonan says there is about €200bn of liquidity being provided to keep day-to-day banking activity going in Ireland.

1818 The Minister says the announcements this evening are about re-building the Irish banking system around Bank of Ireland, AIB and the EBS.

1816 Minister Michael Noonan tells Brian Lenihan the appointment of the consultants for the stress tests were made by the Central Bank in consultation with the previous Government.

1813 Responding to the deputies' statements, Michael Noonan said a more rigorous approach to stress tests were taken this time, adding that they are 'credible'.

1812 Mick Wallace said 'this is crazy' adding that he would not expect his business to be bailed out.

Thomas Pringle tells the Dáil that Fine Gael and Labour have morphed into Fianna Fáil. He said the banks are going to break the State.

1808 Socialist TD Joe Higgins said the debt imposition on the Irish people will be unsustainable.

He accused the government of having capitulated to the financial markets and said the giant casinos of the markets had won again.

People Before Profit Deputy Richard Boyd Barrett accused the Government of having betrayed the aspirations of the people who voted for them.

He said this further bailout would further sink the country into an unsustainable morass of debt.

1804 Independent TD Stephen Donnelly has urged the consideration of a debt-for-equity swap for bondholders in Irish banks and letting some of the banks fail.

He said the equity swap would allow the banks to clean up their balance sheets and start lending again, which was the objective.

1755 In a statement, AIB said it 'fully appreciates the continued strong support of the Irish Government'.

1750 In a statement, the Central Bank said there will be no immediate change with how banks deal with their customers.

1739 Sinn Féin's Pearse Doherty said today drew a line in the sand in relation to changing the EU/IMF deal - he said clearly there will be no change.

He said the veil had been lifted and the Government's strategy is a continuation of the past government's strategy.

He said it was within the minister's gift to apply burden-sharing to the senior bondholders. But he said the gamblers, not the people, will be paid by the State.

He said a commitment had been made during the election campaign and that that commitment was now being reneged on.

1733 Read Minister for Finance Michael Noonan's statement here.

1726 In a statement, EBS Building Society said it welcomed the decision of the Minister for Finance which 'clarifies its future status through a combination with the AIB Group, subject to the State aid and regulatory approvals required.

'The Society understands and accepts the Government's need to reconfigure the banking system to support the economy and will play its part in rebuilding the sector.

'The Society acknowledges its clear new direction and will work with AIB to maximise its value and serve the needs of its customers.

'In the interim, EBS customers can continue to conduct all their business as normal with no change to their existing terms, conditions and relationships.'

1718 Patrick Honohan said that there would be adverse consequences to dealing aggressively with senior bond holders, he said that it would be unwise to take such an action without the endorsement of Europe.

He said there is no question in the Government's plans about doing anything about the senior bond holders, Mr Honohan said the banks would have to move forward without doing anything about the senior bondholders.

1714 Former Finance Minister Brian Lenihan said he wished Mr Noonan well in his job.

He said he was 'delighted' these stress tests represtented a 'worst-case' scenario.

It said because of the criteria for the stress tests it was clear the figures would be so large.

1713 Michael Noonan also said bank depositors can be assured that their funds remain safe.

Concluding his address, he said the radical restructuring of the banking system is designed to put the banking system on a firm footing and break the bonds with our toxic banking past. He said it was essential for the economy and our country.

1711 Mr Honohan said the two pillar approach is something the Central Bank has been behind, the Central Bank worked closely with the Government on the issue.

He said the country is effectively starting from scratch on banking.

Matthew Elderfield said there is a common sense of purpose between the Central Bank and Government.

1710 Read the full statement from Irish Life & Permanent here

1708 Prof Honohan said the Central bank also has a role in consumer protection and would work with the banks to ensure there is better and more considered processes for working out distressed loans or mortgages.

Financial Regulator Matthew Elderfield said banks needed to be upfront with customers and he said people should approach banks and agree a deal if they have loans which are in difficulty.

1705 The minister said the plans will be submitted to the European Commission under State-aid rules.

He said the stress tests carried out are among the most thorough that have ever been conducted.

1704 Governor Honohan said the two bank solution is 'not an ideal situation', he conceded he did have concerns, in particular on competition and cost and pricing.

But he said there are other banks operating in the market.

1703 IL&P Group Chief Executive Kevin Murphy, speaking on behalf of the Board, has described today's announcement as 'extremely disappointing'.

He said: 'It had been our strong belief that the Group could avoid the outcome which has arisen today. We had set out a roadmap which would have allowed us to fix our banking business over time without compromising the integrity of the Group or the position of shareholders.'

1701 IL&P is to be restructured, with the State likely to take a majority stake. Irish Life and Permanent is to sell its Irish Life business.

1700 Bank of Ireland is to shed €30bn of assets.

1659 Mr Noonan said firesales would be avoided but the non-core assets of the banks would be sold off.

1656 Minister for Finance Michael Noonan has announced the banking system will be restructured with two new strong banks.

AIB and EBS will be merged as one of these 'pillars'.

Bank of Ireland will be the other 'pillar'.

He said the previous government ducked, dived and procrastinated, did not fix the banks and paved the road to disaster.

1653 In total, the assessment found that the banks could face losses of €37.7 billion over the next three years under the worst-case, or 'stressed' scenario.

The tests found that banks would need €18.7 billion in new capital to meet new Central Bank targets, but the bank also added another €5.3 billion to bring what it called 'a layer of resilience' in case of possible further losse after 2013.

1652 Read the Central Bank report.

1647 Professor Honohan said smaller, but sounder, Irish banks should be in a better position to provide loans and other financial services to households and businesses to support the Irish economy.

The stress tests were based on estimates that, in a worst-case scenario, the four banks could lose almost €9.5 billion from residential mortgage loans over the next three years.

1645 In total €18.7bn was required, with a 'buffer' of €5.3bn also required to make a total of €24bn.

1643 The Central Bank also set targets for how much the banks must reduce in size, thourgh a combination of run-downs of assets and sales of assets.

Mr Honohan said the aim was to create a sustainable Irish banking system through a combination of recapitalisation, deleveraging and reorganisation.

1637 Central bank Goveror Patrick Honohan says that this figures would only be needed in an 'adverse and unlikely' scenario.

1635 The Central Bank has published crucial stress tests on the Irish banks, which show that €24bn will need to be put into the banks to help them cope with potential losses.

AIB will need €13.3bn

Bank of Ireland will need €5.2bn

EBS will need €1.5bn

Irish Life & Permanent will need €4bn

1617 Read our timeline of events on the banking crisis, charting how exactly we got to this point.

1546 The UNITE trade union has written today to its 10,000 members in Irish Life Permanent TSB, the EBS Building Society, Bank of Ireland and AIB seeking to calm rising anxiety over job security in the Irish banking sector.

In the letter it said 'if the result of the tests mean a major restructuring and consolidation, UNITE will fight to make sure that any redeployment or redundancy is on the best possible terms and most importantly that you are given a choice in whether to accept those terms through voluntary schemes.

'Please be assured that the full resource of the UNITE trade union will be put behind a strong campaign to ensure that workers in the banking sector are not forced to be the only ones to pay the price for management mistakes.'

1534 If you have anything to say, let us know by clicking the Comments tab at the top of this page.

1518 Both the Central Bank press conference and Michael Noonan's statement to the Dáil will be streamed live here.

1514 The European Central Bank will not unveil medium-term funding support for Irish banks, sources have told Reuters.

Internal disagreements within the ECB's Governing Council over the facility means that the new funding arrangement will now not be announced just after the Irish plan, eurozone official sources said.

1505 Watch Will Goodbody's report on RTÉ's One News ahead of the results.

1500 Central Bank Governor Patrick Honohan and Financial Regular Matthew Elderfield will announce the results of the banks' stress tests from 4.30pm, with Finance Minister Michael Noonan to address the Dáil from 4.45pm.