Here’s the full report, click image to open:
The bank recapitalisation grand total: €24bn
Allied Irish Banks: €13.3bn
Bank of Ireland: €5.2bn
EBS: €1.5bn
Irish Life & Permanent: €4bn
More to follow as the central bank’s presentation continues…
Updates: BlackRock (who did the third-party stress test) reckon upon loan losses of €27.7bn over three years with a base case of €20bn
The €24bn recap cost breaks down thus: €18.7bn against losses, €5.3bn buffer.
Further updates: We have the actual report now. Here’s a chart of the actual recapitalisation needs — buried on page 12:
Here’s a bit more on methodology — the test is in three parts:
- A traditional top-down stress test of bank capital that models ‘stressed’ macroeconomic assumptions
- A bottom-up stress test of loan losses over three years, which is informed by BlackRock’s forecasts of losses over the loan lifetimes
- A review which sets targets for banks’ loan-to-deposit ratios to fall from 2011 to 2013 using asset sales. Losses from these sales would be included in the capital requirements of the test’s first part.
Confused? So are we. Here’s a bit from the report that explains it:
Completing these exercises in combination has allowed the Central Bank to model both balance sheet and profit and loss dynamics in a transparent and conservative manner, offering robust reassurance to the market that the resulting capital requirements are based on credible stress modelling. Notably, the incorporation of incremental three-year provisions based on BlackRock-identified lifetime stress loan losses has resulted in a total recapitalisation requirement materially in excess of the stand-alone application of EBA minimum parameters.
The selection of capital targets further adds to the conservatism of the exercise, with the banks participating in PCAR 2011 collectively required to raise €24.0bn in capital in order to remain above a minimum capital target of 10.5% Core Tier 1 in the base scenario and 6% Core Tier 1 in the stress scenario, plus an additional protective buffer. This compares favourably with many banking systems in developed jurisdictions…