Brian Stanley (Laois-Offaly, Sinn Fein)
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Question 47: To ask the Minister for Finance if he will provide an estimate of the potential liabilities to the covered institutions arising from current levels of mortgage arrears as detailed by the Financial Regulator in April 2011. [14244/11]

Michael Noonan (Limerick City, Fine Gael)
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As the Deputy will be aware, according to figures published by the Central Bank of Ireland on 19 May 2011, 6.3% of private residential mortgage accounts were in arrears for more than 90 days at the end of March 2011. My Department has been informed by the Central Bank that robust estimates of potential losses cannot be extrapolated from the arrears figures as mortgage loss amounts will depend on a number of factors including the outstanding mortgage amount and the current value of the property. I can, however, inform the Deputy that the Prudential Capital Assessment Review (PCAR) which formed part of the Central Bank of Ireland's Financial Measures Programme (FMP), which was published in March 2011, provides for an annual stress test of the capital resources of the domestic banks under a given stress scenario. The loan loss exercise in the FMP, which includes estimated losses on residential mortgages, measures the loan losses banks might experience under the base and adverse (stress) scenarios over both a three year and a loan-lifetime horizon, stretching out to 2040. The base scenario is in line with EU forecasts for the Irish economy and the adverse scenario represents an unlikely further economic contraction.

The Central Bank's three year projected base loss for the Irish residential mortgage loan book is estimated to be 5.8% (€5.7 billion) while the adverse scenario is 9.2% (€9 billion). BlackRock's lifetime loan losses post-deleveraging for the total mortgage loan books is 10% (€9.7 billion) in the base scenario while the adverse (stress) scenario is 16.7% (€16.3 billion).

It is important to point out that under the PCAR requirements, the banks will be capitalised to meet the projected Central Bank's three year stress losses. This includes a significant proportion of the projected life time losses to 2040.

Finally, these stress loan-loss estimates are not considered likely to materialise; they are an input designed to ensure the associated capital requirements are fully convincing as being sufficient to cover even extreme and improbable losses.