Ireland agrees to early review of troubled banks' loans

Thu Jun 13, 2013 2:34pm EDT

* Move designed to appease EU/IMF concerns

* Lenders want banks checked before bailout exit

DUBLIN, June 13 (Reuters) - Ireland has agreed to a detailed review of its troubled banks' loan books this year to placate its international lenders and will have its stress tests before a Europe-wide exercise in 2014.

The move is designed to appease concerns of the European Union and International Monetary Fund, which wanted the banks to get a clean bill of health before the end of Ireland's sovereign bailout in December.

Ireland's financial regulator, Matthew Elderfield, said the country would conduct two exercises - one on the quality of assets before the end of 2013, followed by full stress tests in the first half of 2014.

The comments confirmed a Reuters report in May that Ireland had resolved a standoff with its lenders over the timing of the stress tests, which aim to gauge banks' resilience to economic shocks.

"What we will see is towards the end of this year a kind of first phase of work - asset quality review, look at provisioning levels, look at the risk models the banks have got," Elderfield told a parliamentary committee on Thursday.

"That will feed into the asset quality review of the ECB and then the stress tests will come after that. So it will be a phased process with some deliverables before the end of the year."

Ireland's banks have not been stress-tested since 2011 when consultant BlackRock identified a 24 billion euro ($32 billion) capital hole.

Dublin had wanted the tests carried out in conjunction with a European-wide exercise, expected in mid-2014.

The finance ministry said it would produce a final report on the banks' implementation of their deleveraging plans, and compliance with asset disposal and run-off targets will be discussed with the European Commission, IMF and European Central Bank.

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