Kathleen Lynch (Cork North Central, Labour)
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Question 122: To ask the Minister for Finance the timeline for the completion of the Prudential Capital Assessment Review on minimal capital requirements for the Irish Banks; when he expects any capital needs arising from the PCAR to be met by the Exchequer; the mechanism by which he intends to meet these capital needs whether by promissory notes, direct transfer from the Central Fund, direct transfer from the National Pension Reserve Fund and so on; and if he will make a statement on the matter. [1369/11]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Deputy will be aware that the plan to reorganise the banking system in Ireland is a key part of the EU/IMF Programme of Financial Assistance to Ireland. This reorganisation has several elements, which will be bolstered by raising capital standards. While I expect that, in a restructured system, banks will be able to raise capital in the market, I recognise that the higher standards may imply that public provision of capital could be needed in the short term for banks that are deemed to be viable. To support this process — and to render it credible — the Central Bank is undertaking a review of the capital needs of banks, called the Prudential Capital Assessment Review 2011, or PCAR, on the basis of current asset valuations and stringent stress tests. This review will build on the previous PCAR announced in my Statement to Dáil Éireann of 30 September 2010, and is due to be completed by 31 March 2011.

The design and planning of the PCAR are already well under way and the terms of reference for its design and implementation have already been agreed between the Central Bank, the European Commission, IMF and ECB staff. 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 require additional capital, the Central Bank may impose this requirement on them.

The PCAR, along with all the other measures being taken to stabilise the banking system, should enhance confidence in the solvency of the banking system in Ireland.

As the Deputy is aware, the National Pension Reserve Fund will provide up to €10 billion of the State's €17.5 billion contribution to the €85 billion EU-IMF programme. Any further capital requirements, if required, arising from the PCAR will be subject to alternative sources of financing, subject to the agreement of the Irish Authorities and the International Bodies.