I have said on many occasions in the recent past that I do not expect the ECB exercise to result in a requirement for additional capital given the very large amount of new capital that has gone into the Irish banks in recent years and all the work that has been done by the Central Bank including the Balance Sheet Assessment in Q4 2013. At the conclusion of the Balance Sheet Assessment it was confirmed that, having recognised additional provisions, each of the banks' capital ratios were above the minimum regulatory requirement.
It is not possible for me to give a definitive answer as to how a capital deficit would be addressed, should such a deficit be identified during the course of the European wide stress test, in advance of the conclusion of the exercise. It is important to keep in mind that, in the unlikley event that new capital was required, the following sources of capital would be accessed before any consideration of redress to the State:
- The conversion of existing contingent capital notes.
- Internally generated capital through retained earnings.
- Private sources including existing equity investors.