The Deputy will be aware that in preparation for the timely introduction of the Single Supervisory Mechanism (SSM) the Central Bank of Ireland (CBI), in consultation with staff of the EC, ECB and IMF, will conduct a stress test in accordance with the new EU methodology, ahead of and in close proximity to the upcoming SSM exercise.
The intention is to ensure that appropriate preparations are made early so that the Irish banks are in the strongest possible position to achieve the key goal for Ireland of a smooth entry into the SSM in 2014.
Consequently the Irish authorities have agreed with the Troika that detailed preparatory work required for the stress test will be completed in 2013. The Central Bank of Ireland, in consultation with the Troika, will conduct a series of diagnostics to provide greater clarity regarding the underlying quality of banks’ balance sheets. A key element will be a comprehensive Balance Sheet Assessment to be finalised by end-November 2013.
It would not be appropriate to prejudge the outcome of this assessment and it should be noted that Irish banks remain well capitalised.
As the Deputy is aware on the 20th June 2013 the Eurogroup of Euro-area Finance Ministers agreed a framework under which the European Stability Mechanism (ESM) will operate its direct recapitalisation instrument. In addition the Eurogroup also agreed to consider retro-active recapitalisation of banks on a case-by-case basis once the instrument enters into force.
From a European perspective it is important to have this instrument available when EU-wide bank diagnostic exercises begin in the lead-up to the Single Supervisory Mechanism (SSM).
