Aodhán Ó Ríordáin (Dublin North Central, Labour)
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Question 163: To ask the Minister for Finance the level of engagement between him and the State guaranteed banks in terms of potential large scale debt write-downs of loans by the covered banks; the mechanisms that exist to ensure that debt write-downs do not take place at effective cost to the Irish Exchequer; and if he will make a statement on the matter. [4016/12]

Michael Noonan (Limerick City, Fine Gael)
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As the Deputy is aware there is on-going and detailed engagement between my Department and the covered institutions. The current and projected capital requirements of the institutions form part of this engagement these and are monitored and assessed on an on-going basis. The Prudential Capital Assessment Review (PCAR) carried out in 2011 by the Central Bank independently assessed the capital requirements having regard, among other things, to the asset quality and the potential impact of such asset value/quality in base and stressed case scenarios.

The Central Bank of Ireland has informed me that in October 2011, the EBA conducted a review of the capital requirements of the 91 European banks that participated in the 2011 EU-wide stress test against a more stringent set of conditions compared to the 2010 EBA stress test, for example incorporating a capital buffer against sovereign debt exposures and the removal of certain regulatory capital filters) and a Core Tier 1 ratio of 9%.

As noted by the Central Bank of Ireland, the results of the EBA tests show that the Irish banks meet the stress requirements and do not require additional capital beyond the requirement set in the Financial Measures Programme published in March 2011. The results of the EBA stress tests take account of the recapitalisation measures announced following the Prudential Capital Assessment Review (PCAR).

The Irish banks have been recapitalised, following the Prudential Capital Assessment Review (PCAR) process in March 2011, and are required to maintain a minimum Core Tier 1 Ratio of 10.5% on an on-going basis. Further the Central Bank has also advised me that as agreed in the Memorandum of Understanding (MoU) and the Memorandum of Economic and Financial Policies (MEFP) with our external partners, that the PCAR will be conducted as an annual stress test of the capital resources of the domestic banks.