As at March 2011, when the Central Bank published the Financial Measures Programme (FMP) Report and following the Prudential Liquidity Assessment Review (PLAR), a surplus of some €70bn of loans relative to a sustainable Loan to Deposit Ratio of 122.5% at end-2013 for the aggregate domestic banking system, was identified for deleveraging. De-leveraging is achieved through the separation of assets into ‘core’ and ‘non-core’ elements, and the gradual run-off and disposal, avoiding a fire-sale, of these non-core assets. The Prudential Capital Assessment Review (PCAR) included assumed losses of €13.2bn for the sale of such assets and as such the banks were assumed to be able to absorb this level of loss from disposal without affecting future capital. The figure of €13.2bn was not broken down by bank by the Central Bank in the FMP Report due to commercial sensitivities. In this regard, deleveraging has progressed well. Deleveraging of €49.9bn has been achieved by Allied Irish Banks (AIB), Bank of Ireland (BOI) and Permanent TSB from 31 December 2010 to 30 September 2012. Aggregate losses have not been disclosed by the Central bank due to commercial sensitivities and confidentiality of information, however the Pillar Banks where disposals have been concentrated, have disclosed that overall cumulative losses incurred have been within PLAR assumed losses.
The on-going progress in deleveraging and deposit gathering activities has seen BOI make further progress towards improving its Loan to Deposit (LDR) ratio reducing from 136% at June 2012 to less than 130% in November 2012. Similarly, AIB’s LDR reduced to less than 120% at the end of October (including loans held for sale) from 125% at end of June.
