Tuesday, 27 May 2014

Questions (38)

Micheál Martin


38. Deputy Micheál Martin asked the Minister for Finance if he has seen the letter sent from Mr. Mario Draghi in relation to EU-wide stress tests; and if he will make a statement on the matter. [15987/14]

View answer

Written answers (Question to Finance)

I can confirm that I have seen the letter of 20 March 2014 from Mr Draghi to the Deputy and have noted the contents therein which are not at variance with views shared by the ECB as part of the Troika programme. In particular I note that Mr Draghi has highlighted that the Balance Sheet Assessment completed in 2013 by the Central Bank of Ireland is different to the SSM comprehensive assessment as it was not forward looking and did not include a stress test. The Deputy will be aware that the SSM comprehensive assessment comprises three components:

- A supervisory risk assessment;

- An asset quality review (AQR); and,

- A stress test.

Notwithstanding Mr Draghi's comments in relation to the difference between the two exercises, the AQR component of the SSM comprehensive assessment is similar to the Balance Sheet Assessment completed by our own Central Bank and is the starting point for the stress test. 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. This, together with the large amount of new capital that has gone into the banks in recent years, leaves our banks well positioned going into the SSM comprehensive assessment and stress tests.

I also note that Mr Draghi makes reference to the "still very large stock of non-performing loans" which is a matter we have clearly been focused on for several years.  I take comfort in this regard in the progress of each of the banks in achieving the resolution targets set by the Central Bank for both residential mortgage and SME exposures. 

Finally, Mr Draghi refers to "the completion of the banks' restructuring and reforms". The EU Commission had approved the Restructuring Plan of Bank of Ireland back in 2011 and, since Mr Draghi's letter, the EU Commission has approved the Restructuring Plan of Allied Irish Banks.  Work on the Restructuring Plan of permanent tsb is ongoing. Restructuring and reform is not limited to Restructuring Plans and there are many areas where we continue to challenge the banks operating in Ireland - not just Bank of Ireland, Allied Banks and permanent tsb - to ensure they appropriately support the needs of the economy.