Joan Burton (Dublin West, Labour)
Link to this: Individually | In context

Question 152: To ask the Minister for Finance his views on reports attributed to the Chairman of Anglo Irish Bank recently to the effect that the further costs of recapitalising the Irish banking sector will run to more than the €35 billion currently envisaged as the maximum under the terms of the International Monetary Fund - EU programme of external assistance; if he will provide a revised estimate of the likely total cost of recapitalising the Irish banking sector; and if he will make a statement on the matter. [47991/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
Link to this: Individually | In context

The Deputy will be aware that I have already stated that I do not agree with the comments made by the Chairman of Anglo. The Central Bank set out its estimates of the banks' capital requirements following the results of the PCAR exercise on 30 September. The PCAR takes account of all elements of the banks' loan books, including the mortgage loan books. It has taken a realistic view of the likely losses to mortgage lenders. Indeed, the loss rates that have been used in both the base and stress case scenarios are in excess of the latest official figures released by the Central Bank.

Furthermore, the detailed review undertaken by the external authorities of the financial status of the Irish banks and, in particular, of the Central Bank's PCAR exercise was an important part of the technical discussions underpinning the negotiated package of assistance with the IMF and our European partners. The Governor of the Central Bank recently confirmed that the external experts had found no fault with the methodology used for the PCAR stress test earlier this year.

As part of the agreed assistance package, the Government has committed that the minimum core tier 1 capital ratios for AIB, Bank of Ireland, ILP and EBS Building Society will be increased from 8% to 10.5%. This decision is consistent with recent international trends for banks to hold higher levels of higher quality capital, reflecting both the new Basel III standards and market expectations. As an immediate step towards enhancing confidence in the sector, the Central Bank is instructing these institutions to increase their capital levels so that they meet a 12% core tier 1 ratio (after taking account of expected future losses out to December 2012).