–Says Ireland Budget Deficit Efforts “Broadly On Track”

BRUSSELS (MNI) – The two Irish banks that are currently being
stress tested at the European Union level have already passed stringent
national stress tests, European Central Bank Governing Council Member
Patrick Honohan said on Friday.

Irish banks AIB and Bank of Ireland are being stress tested by the
Committee of European Banking Supervisors, or CEBS, as part of a
Europe-wide stress testing exercise, the results of which will be
published July 23.

“We have already stress tested these banks,” Honohan said,
according to the text of a speech at the presentation of the central
bank of Ireland’s annual report.

“Indeed, the severity of the tests we conducted earlier on loan
losses exceeds that of the CEBS version, although CEBS has extended the
test to reflect events in the sovereign debt markets,” he said.

Honohan noted that Ireland had already taken action on its banking
system, setting higher capital requirements for its banks in March this
year.

“We expect that the banks will meet the capital requirements set
out by us, which we believe are sufficient to withstand future stress
scenarios,” he said.

But he said that the banking sector remains a key concern for him,
along with the issue of Ireland’s public finances and restoring the
country’s competitiveness.

Ireland’s economy is currently experiencing a deep recession, as a
10-year boom, fuelled by cheap credit and rising property prices,
reverses.

“The failures of the banking system here have rocked the economy
and the public finances, with severe impacts on all members of society,”
Honohan said.

“As for the public finances, it remains critical that the
government sticks firmly to the fiscal adjustment programme that it has
embarked on,” Honohan said, adding that “the budgetary arithmetic is so
far broadly on track.”

“This path, difficult as it may be, is the surest route to
supporting the recovery in confidence in the Irish economy both
domestically and internationally,” he added.

–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com

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