FRANKFURT (MNI) – Available data on loan losses do not indicate
that Irish banks are undercapitalized, the country’s head of financial
regulation Matthew Elderfield said Monday.
However, market expectations on bank capitalization have increased
on a global level, the regulator conceded in a speech to compliance
officers, a copy of which was provided in advance by the Central Bank of
Ireland.
“Equally, concerns about government finances, the current
macroeconomic environment and the future prospects for growth and
employment in Ireland have impacted confidence in Irish banks,” the
regulator underscored.
“As such, it is desirable that additional measures are now taken
covering both capital and balance sheet size,” he emphasized.
Given continuing market uncertainty, additional policy measures are
being considered, “some of which might be categorised under the heading
of ‘overcapitalizing’ the Irish banks,” he said.
“For example, as a principal source of concern relates to the
possibility of further losses beyond those assessed by the PCAR
[Prudential Capital Assessment Review] process, then a standby
contingent capital facility could be considered to provide a backstop to
the banks,” he explained.
“Given the current budgetary position, this facility would need to
be provided by external sources,” he stressed.
Ireland’s application for aid to the IMF and EU means the
capability to take needed additional measures “will soon be in place. It
also means that progress can be made to restructure the Irish banking
sector to a smaller size with more sustainable funding ratios,” he said.
“The cost of the banking crisis in Ireland will be considerable,”
he said.
“The Irish people are now paying a heavy price for the failures at
the heart of banking. We have to try to ensure, as best we can, that we
make the changes required to address the shortcomings identified as
contributing to the crisis,” he emphasized.
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