Dáil Éireann Debate, Wednesday - 23 May 2012
62 Deputy Mick Wallace asked the Minister for Finance his views on the ability of the banks to generate their own capital after 2013 in view of the fact that last year’s stress tests assumed a quicker path to economic recovery; and if he will make a statement on the matter. [25654/12]
Amharc ar fhreagraThe Central Bank has informed me that the solvency stress test applied by the Central Bank of Ireland in 2011 was used to recapitalise the PCAR banks. The stress test scenarios were designed to represent extreme but plausible events, but they were not forecasts. Indeed, the scenarios included allowances for operating profit before impairments. These allowances took into account expected operating income and expenditure and were reflective of the macro-scenarios. Whilst the PCAR was based on a three year horizon, capital buffers were also included for amongst other things, post-2013 capital requirements, including for example additional loan losses not absorbed by reserves that will be generated in the financial year's post-2013.
The macroeconomic environment deteriorated in 2011 and as a result, arrears levels and loan loss provisioning has increased. As the realised scenario in 2011 was within the bounds considered for the purposes of recapitalising the banks in 2011, the Central Bank is currently of the view that the banks are adequately capitalised.
