Prudential Capital Assessment Review

The Central Bank and Financial Regulator have released a document outlining their methodology in setting capital requirements for the banks. The banked calls this process its Prudential Capital Assessment Review (PCAR). It is available here.

8 replies on “Prudential Capital Assessment Review”

Why does “PCAR” sound like another “HSE”?

Still. I’m just an idiot peasent.

I don’t be noin them tings.

Fractional reserve banking is always dangerous, as demand for the deposits is low when a bubble is forming, but substantially higher when chaos reigns in a period of deflation. Volatility, the word that sends shivers down the spine of the regulator. If s/he has a spine. Freemasonry is rife in banking, so do not expect to have a female regulator anytime soon.

The larger the requirement, the safer. As always, in a deflation, this certainly makes things worse. More money that cannot be lent out. And the money has to be funded. More debt, in a deflationary spiral that has a long way to run. The bigger the bank, the bigger the reserve required. But still no lending, not in a deflationary depression. More dead money. Big zombies. That is what we need! That will really make a difference. We’ll really be ready for the upturn. This time it is different!

Given the circumstances, the USA is thinking of stripping off the fig leaf and going for the full monty, nil reserves, making it a naked Ponzi scheme. At least it has a certain honesty about it! Fiat money with full state guarantee is worthless when the state can no longer pay its bills except by devaluing the currency.

Fiat currency always there, except when you need it!

D_E
They can do whatever they like.

As long as the ECB signs off on it. Greece has the measure of the ECB and the EC. They had help from one of the masters of the universe. Anyone can hire them. If they have the cash.

No one is accountable, if it is done in the interests of the public service. Sorry the state.

When was anyone ever held to account in Ireland?

@ Pat Donnelly

“D_E
They can do whatever they like.”

To the point and not beating about the bush.

Exactly.

They can do what they want.

Then, having lost €50bn of our Treasure, they say they can set up a regulatory system to save us from this insult again.

And we don’t get to vote on it. Any of it.

The €50bn lost or the new regulator.

“No one is accountable”

And no one will be.

Welcome to the next merry go round.

Only €50bn a go.

Happy days.

Happy days.

For very good reasons the focus is on the banks on the likely evolution of thier balance sheets, but we deparately need some assessment of the State’s balance sheet to put these mind-boggling numbers into some sort of context. I understand that Colm McCarthy is putting some effort into this area – and I expect is being hindered and slowed by the poor quality of the data available, but we need something now irrespective of how heroic some of the assumptions might be. And I suspect the heroic nature of assumptions required would pale into insignificance compared to that of some of the assumptions being made about the banks.

I believe some basic, but reasonably well-founded, estimates of the current structure and likely future evolution of the State’s balance sheet – as well as some future funds flow estimates – would provide some clarity and reassurance to a populace in almost stunned disbelief. If economists won’t do this, who will?

“As the starting point for determining the stress capital requirement, the banks were provided with a specified macroeconomic scenario based on a hypothetical delayed economic recovery, involving negligible GDP growth in 2011 and 2012, persistent unemployment increasing to 14.7% in 2012, a further cumulative house price decline of 24.8% in the years 2010-2012 beyond the 31.5% decline reported and other parameters. The severity of the stress test takes account of the circumstances of the Irish economy and its position in the economic cycle.”

Is this really the most likely worst case?

@Paul Hunt

The defining feature of the ExecutiveGov-Citizen relation in the past 18 months has been ‘Obfuscation’ & ‘Deflection’ – in terms of ‘spin’, misinformation, secrecy, hidden data and information, fear-mongering by Ministers, and so on ……. aided and abetted by well connected upper-echelon leaders who got us into this mess in first place and 95% still in situ, and perhaps most surprisingly – by a generally fawning 4th estate – RTE & Indo Group in particular – 95% of whom appear to be incapable of substantively challenging the spin:

The foundation of this ExecutiveGov strategy appears to be a recognition that the best way to keep a supine citizenry (and backbench Gov TDs) supine is to keep them ignorant as long as possible and to dismiss the [lets be realistic] ‘tiny’ informed opposition with loud fear-mongering mantras … and spins to deflect attention onto the international crisis, when the roots of the Irish crisis are 95% home-grown.

After 18 months of so called deliberation, what do they do? They surrender unconditionally to an abstract ideological equation and put up the children and grandchildren of the nation as collateral. They socialized cowboy debt, for which they bear a significant responsibility, 100% on the backs of Irish citizens – present and future. Craven Capitulation to the Cowboys, Contempt for the Citizenry, total reversal of the logic of republicanism which places the interests of the citizenry before that of dominant cliques who ‘fumble in the greasy till’, and our international reputation as ‘thinking people’ who can ‘stand up for ourselves’ in tatters – shredded.

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