Dáil Éireann Debate, Thursday - 28 February 2013
18. Deputy Willie O'Dea asked the Minister for Finance if he is satisfied that the projected worst case scenario of losses in PCAR 2011 for the covered banks of €9 billion on their mortgage books over the period 2011-13 will not arise; and if he will make a statement on the matter. [10620/13]
View answerAs the Deputy will be aware, the Irish banks were required to raise €24bn in capital following the 2011 Prudential Capital Assessment Review (PCAR) 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. The Central Bank made its decision on required recapitalisation based on loan-loss projections along with further calculations concerning the prospective income, expenditure, and deleveraging plans of the banks as outlined in the 2011 Financial Measures Programme (FMP) Report.
In order to arrive at a stressed loan-loss estimate that was fully credible to the international markets, the Central Bank engaged BlackRock Solutions, a specialist in analysing potential loan losses under stressed conditions. However I must again reiterate that the stress test scenarios were designed to represent extreme albeit plausible events, but they were not forecasts.
The Central Bank is responsible for monitoring such losses and capital at the banks and tracking their progress against PCAR 2011. I understand that they are due to publish such a report tracking this in the near future, which should provide answers to the type of question you have posed.
