Irish Banks To Undergo 'Rigorous' Stress Test

The ability of banks in Ireland to " adequately provide for the losses they are carrying" will be rigorously tested by the forthcoming ECB stress tests, Fianna Fáil Finance Spokesperson Michael McGrath has said.

Deputy McGrath was speaking following the publication today by the ECB of its manual on the methodology for the forthcoming stress tests, saying: "The Minister for Finance and the banks themselves have been at pains to point out in recent times how well capitalised the banks are and how much work they have done in facing up to impaired household and SME loans. It is to be welcomed that, for the first time, the Irish banks’ loan provisions will be assessed alongside other European banks using a common set of criteria. This will enable us to put the spin aside and get a proper handle on the health of our banking system.

The Deputy added: "In a Dáil reply to me in January, the Minister for Finance confirmed that in June 2013 the Central Bank set quarterly targets for covered banks to move distressed SME borrowers onto longer-term solutions. However, these targets were never published; we do not know what the longer-term solutions are and there is no evidence that the performance of the banks has been independently audited.

"While the Mortgage Arrears Resolution Targets (MART) programme is far from perfect, it at least allows the performance of the banks in dealing with mortgage arrears to be held up to scrutiny. In the case of SME debt, we need published targets for the roll out of sustainable solutions; we need to clearly define what those solutions are; and the banks’ performance in dealing with SME indebtedness needs to be independently assessed. SMEs are the lifeblood of the Irish economy and a strong and vibrant SME sector is an essential ingredient in Ireland's planned economy recovery."

(MH)