Joe Costello (Dublin Central, Labour) | Oireachtas source

The remarks by the UCD academic Morgan Kelly related to the stress testing by the ECB. The ECB comprehensive assessment will not deal with loan restructuring as such. It will determine whether the banks have sufficient provision against their loans and capital. Irish banks have undergone such an exercise prior to the troika exit. The stress testing on that occasion proved to be successful. This is the second in less than three years. It has led to a substantial increase in the loan provisions made at the end of the year and as such we do not anticipate any capital issues for the Irish banks as a result of the comprehensive assessment.

Professor Kelly presented a hypothetical situation that in the third stress testing the ECB could find the banks would be unable to respond satisfactorily and that there would be another major debt problem which would cause considerable difficulties for the SME sector. The rate of restructuring is 90% for the Bank of Ireland and 65% for AIB. The banks have met the targets set. There is no reason to believe that even though we are not in possession of the full figures, the property related debts are of such a nature that would cause the difficulties that were feared in that hypothetical situation where we did not pass the stress testing. The scenario as presented by Professor Morgan Kelly is hypothetical. The response of the banks in dealing with the problems has been shown to be successful by two stress tests.

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