DUBLIN, Feb 11 (Reuters) - Ireland is confident its battered banks will pass European Union stress tests later this year and will not require any extra capital, its Finance Minister Michael Noonan said on Tuesday.
But it is also still holding out for European help in recapitalising its banks, arguing that it took a hit on behalf of Europe when it rescued the lenders, Noonan said at the Reuters Euro Zone Summit, a series of interviews with top policymakers across the region.
Dublin had hoped its own “balance sheet assessment” of Ireland’s main banks, conducted last year as a condition of leaving its EU/IMF bailout, would count as part of Europe’s banking industry check-up.
But the European Central Bank put the banks through their paces in the same way as other lenders in 2014 and Noonan said a rebound in property prices - after the crash wiped off 50 percent - should help their balance sheets.
“With the rising property prices, we don’t envisage capital being required in the Irish banks,” Noonan said.
“But the bottom line I suppose on stress tests is if you knew the answer before the stress tests, you wouldn’t have to do the stress test,” he said. “All the evidence that we have is that we won’t require extra core Tier 1 capital.”
Ireland’s debt is 120 percent of gross domestic product, one of the highest levels in the EU, and help with recapitalisation and selling stakes it took in the banks would help bring that figure down.
In a series of bailouts that began in 2009, Dublin pumped more than 28 billion euros into Bank of Ireland (BoI), permanent tsb (PTSB) and Allied Irish Banks (AIB) , and more still into banks that have since failed.
“We have the promise that was made in June 2012 that there would be retrospective recapitalisation of the Irish banks to compensate us for the fact that, by not burning bond holders, we ensured that the Irish taxpayer protected the European banking system from any possible contagion,” Noonan said.
”The promise was made and the commitment was reinforced by (German) Chancellor (Angela) Merkel in a meeting with our prime minister and subsequently reinforced in a meeting with (French) President (Francois) Hollande and our prime minister.
“So while we have had various members of the European bureaucracy saying that they couldn’t quite see how one would give effect to this, we’re not taking it off the table because we see it as solemn commitment made.”
Noonan said Ireland can take its time in deciding when best to sell down its stakes in the banks and it could test the waters by selling a small tranche in AIB in the next two years to establish a market price.
BoI was the only lender to escape nationalisation and repaid 1.9 billion euros to the state last year. Noonan said he would prefer PTSB to have a stronger balance sheet to help lending to support the economy, which is expected to grow by about 2 percent this year.
For more summit stories, see ID:nL5N0LA23S]
Follow Reuters Summits on Twitter @Reuters_Summits (Additional reporting by Conor Humphries in Dublin and Paul Taylor and Mike Peacock in Brussels; Editing by John Stonestreet)