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Financial Regulator says Irish Life & Permanent will have to raise an additional €145m of Core Tier 1 capital
By Finfacts Team
Sep 10, 2010 - 4:30:18 PM
The Central Bank and Financial Regulator has
today published the results of its Prudential Capital Assessment Review (PCAR)
for Irish Life & Permanent plc (ILP) for the three years until 2012 and the
financial group will have to raise an additional €145m of Core Tier 1 capital.
The Financial Regulator said these capital levels
are being set for the ILP consolidated group, which is covered under the
government guarantee, to ensure that it can withstand future losses, even under
very stressed conditions. In addition the Central Bank and Financial Regulator
has also applied the Committee of European Banking Supervisors (CEBS) stress
test methodology to ILP.
Findings of the Prudential Capital Assessment Review
The capital level is consistent with the new capital
requirements announced for other Irish credit institutions in March 2010 and
will ensure that ILP strengthens its capital position.
The PCAR has been undertaken to determine the
recapitalisation requirements of the credit institution with reference to a base
case and a stress case:
Irish Life & Permanent plc is not required to raise any
additional capital in respect of the base case, as it meets the 8% Core Tier 1
and the 7% Equity Tier 1 requirement under the base case, but is required to
raise an additional €145m of Core Tier 1 capital to meet the stress case target
of 4% Core Tier 1.
The capital requirement must be in place by the 31st May
2011. This level of capital must be met after taking account of all future
profits and losses and will be principally in the form of equity. Equity is
considered the highest quality form of capital, and the emerging international
standard. In addition, further amounts are added on in the calculation of future
loan losses. The requirements also mean that ILP cannot go below a level of 4%
core tier 1 capital in a severely stressed scenario. ILP will be required to
submit its recapitalisation plan to the Central Bank and Financial Regulator
within 30 days.
ILP Statement
In a statement, ILP confirmed that if the bank and the
life company are separated as has been proposed as part of its current offer for
the EBS, it estimates that €925m of capital would be needed to recapitalise the
bank, Permanent tsbon a stand alone basis. ILP said it envisages that this
would be funded from internal resources, a liability buy back programme and an
external capital raising exercise.
