AIB and BoI in EU Stress Test

AIB and Bank of Ireland have been included as two of the 91 banks chosen for the stress test being conducted by the Committee of European Banking Supervisors. They don’t do too well in JP Morgan’s version of the test, reported here. Results will be released on 23 July.

10 thoughts on “AIB and BoI in EU Stress Test”

  1. The stress tests are supposed to be a clear the air exercise for banks that are in better shape than our 2 lovely institutions. There does not appear to be any test or blessing that can clear the cloud hanging over the 2 of them.

  2. You would have thought that a stress test would not be just one set of ‘what if?’ conditions/parameters – which from my reading, this test is.

    Surely you would look at it along the lines of best to likely to worst case scenarios? Then you would know just how bad it has to get before more banks start toppling over and could prepare for that eventuality i.e. you manage the situation to prevent it from reaching the point where it becomes ‘that bad’ because you know precisely what ‘that bad’ looks like. These guys should be thinking the unthinkable and getting their risk management hats on.

    This just looks like a PR exercise to me. Yes, a couple of banks like AIB and some other PIIGS banks etc. will be ‘found wanting’ but we already know that they are basket cases. Hogwash or whitewash? No doubt when a disaster does come along they will tell us it was ‘unforseeable.’

    Lots of PR activity coming out of TPTB in the Eurozone this week about the stability of the Euro, Eurozone survival and how we won’t be going into a double-dip recession. ‘Believe nothing until it has been officially denied’, as someone once said. They must be really worried about something to be wheeling all the big guns out like this. I wonder when Spain is going to ask for help? My sister just got back from 2-3 years out there (lost her job and had to return) and tells me it’s all getting pretty awful for the average Jose.

    I used to think ‘double-dip’ was a sherbert confectionary.

    Must dash – going to be kayaking for the RNLI this weekend and someone tells me my least favourite rugby pundit Mr Hook is going to be there. Oh sorry Mr Hook. Did I splash you? Nice suit.

  3. Oh well, I suppose at least BoI will come out of this stress test as being good at taking the odd punt (sorry, I mean ‘investment management’) now that Pat Kennedy, the Paddy Power CEO, has been appointed to the board. As he likes to say: “The punter-friendly bookmaker.”

  4. Does the JP Morgan analysis reflect the capital that Bank of Ireland and AIB have promised to take on later this year? In other words, will the tests suggest that the capital targets set by the Regulator are inadequate?

  5. The JPM report suggests non-performing loans at our banks are similar to Germany, France, etc. Amazing – despite the large crash in real estate and GDP, our banks were saavy enough to keep their NPLs near Germans’.
    Shows how impossible the task is for these analysts -only when NAMA was created did we see the banks mark down those loans that we now learn are mostly not even serviced. So how can these stress tests have meaning if NPLs reporting is left to the same banks and regulators that have not reported problems in the past? The real problem is liquidity in any case – the banks have around 75bn euros of bonds and loans falling due by the end of the guarantee period – December now. Someone needs to refinance those, and many bonds fall due in September (all stacked up ahead of the end of the original guarantee plan). The market won’t refinance all this for the banks, so it must be the ECB, or, the EU/IMF? Perhaps the stress test is one more fig leaf to justify the ECB kicking the can (bank defaults on senior creditors) down the road by bailing out the banks yet again. If not, we are heading straight to the IMF around September.

  6. It now appears the the required capital hurdle rate to pass the Stress Test is a Tier 1 of 6%. So BOI would pass given that it has raised capital. AIB would also probably pass assuming it disposes of M&T and Poland and raises urther capital.

  7. yes 6% Tier 1 after the stress scenario.

    The CB hurdle at 4% refers to core or equity tier 1. In the case of BOI at the stress test level it will probably have a greater than 4% core and a 6% Tier 1 ratio.

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