Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context

Question 101: To ask the Minister for Finance if the stress tests carried out on the four covered institutions are adequate in view of the fact that there are concerns that some of the adverse criteria have been exceeded, including commercial and domestic property values and the holding of Government bonds; and if he will make a statement on the matter. [22283/11]

Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context

Question 102: To ask the Minister for Finance if he is concerned with the recent report (details supplied) which indicated that commercial property has declined in value by 7% in the first six months of 2011; his views on report findings that the abolition of upward-only rent reviews by Government would see a further 20% to 30% decline in commercial property values; the impact such a decline would have on the adequacy of the stress tests of the four covered institutions; and if he will make a statement on the matter. [22284/11]

Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context

Question 104: To ask the Minister for Finance if he will consider postponing the recapitalising of the covered institutions in view of the concerns about the adequacy of the stress tests; and if he will make a statement on the matter. [22286/11]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context

I propose to take Questions Nos. 101, 102 and 104 together.

I am aware that certain commentators and reports are suggesting that the Irish property market could experience further declines. However, I would remind the Deputy that the PCAR bank stress tests carried out by the Central Bank are among the most thorough and demanding such tests ever performed in Ireland and or indeed anywhere in the world. For transparency purposes the Central Bank has disclosed the full details of the base and stress scenario assumptions in its report. The potential impact on commercial rents by new legislation was not specifically modelled but the loss forecast involved taking a conservative view on rents actually being received and therefore the values derived from those rents was conservative.

In addition to the conservative economic assumptions built into the capital scenarios the Central Bank has gone further than its international peers – including the recent EBA stress test results - in setting its requirements by taking a three year, rather than two year outlook and also by requiring capital levels after any stress losses of 6%, rather than 5% of Risk Weighted Assets. The need to convince the market as to the strength of our banks has been the significant driver of these higher capital targets. They are founded on robust models, highly conservative assumptions and also include additional conservative buffer layers for any additional unknown factors.

The Government is fully supportive of the work carried out by the Central Bank and its independent advisors in establishing a capital base for our banks that will be one of the most stringent in the world. I see no reason therefore to question the adequacy of the stress tests, and there is no basis for deferring the recapitalisation of the institutions in question.

With regard to upward only rent reviews, the Minister for Justice and Equality recently informed the House that following an initial consultation process with the Attorney General, he had forwarded outline proposals to her for further examination and development. Those proposals have been the subject of preliminary discussion by Government, and will be considered further in the autumn when the work in relation to them should be at a more advanced stage.

Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context

Question 103: To ask the Minister for Finance the date on which he intends to recapitalise the covered institutions; the amount of same; and if he will make a statement on the matter. [22285/11]

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context

Question 113: To ask the Minister for Finance the anticipated final figure for the amount of additional capital, net of the various liability management exercises, which is to be invested in AIB / EBS, Bank of Ireland, and Irish Life & Permanent by the end of July following the stress tests published in March 2011; and the way this amount is to be funded. [22296/11]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context

I propose to take Questions Nos. 103 and 113 together.

The recapitalisation commitments made by the State to date and the additional capital requirements of the banks as prescribed by the Central Bank under the March 2011 PCAR/PLAR stress tests are set out in the following table:

The Deputies will be aware that the Government has, however, instigated processes which have reduced and will further reduce the cost to the State by looking for significant contributions from subordinated debt holders, by the sale of assets to generate capital and, where possible, by seeking private sector investors. It is expected that the effect of these actions will be to reduce the amount of capital required by the State very significantly. In particular, a number of the financial institutions have recently engaged in liability management exercises in relation to subordinated debt. The results of the liability management exercises at the AIB, Bank of Ireland and Irish Life & Permanent will be announced in full to the markets on their conclusion but have already resulted in the generation of some €4.4bn in Core Tier 1 Capital, reducing accordingly the amount required to be contributed by the State to the €24bn PCAR capital requirement.

Only after the burden sharing measures have been completed, all sources of private capital have been exhausted and shareholders in the three institutions have been given the opportunity to vote, will the level of further capital required to be contributed by the State in order to complete the recapitalisation measures be finalised to the level of detail being requested by the Deputies. However, the State has committed to completing the recapitalisations as agreed under the Programme of Financial Support for Ireland to the extent possible by 31 July. State funding for the recapitalisation will come from funds currently held on deposit in the banks by the Exchequer and the National Pensions Reserve Fund.