DUBLIN: Ireland has resolved a standoff with international lenders over the timing of so-called “stress tests” of its bailed-out banks that threatened to cloud its exit from an EU-IMF rescue deal at the end of the year, four sources close to the matter said.
The government has agreed the tests — aimed at gauging banks’ resilience to economic shocks — could take place ahead of a Europe-wide exercise, in line with the European Union and International Monetary Fund’s desire for the banks to be checked before the end of Ireland’s sovereign bailout deal in December.
Dublin had wanted the tests carried out in conjunction with a European-wide exercise, expected in early 2014.
“The situation has been defused,” one of the sources said.
Ireland’s banks have not been stress-tested since 2011 when consultants Blackrock identified a ¤24bn ($31bn) capital hole.
Poor results from a new set of tests could result in the government having to funnel more capital into state-backed lenders, on top of ¤64bn already poured in, potentially complicating Ireland’s ability to fund itself from international bond markets.
The deal paves the way for Ireland to run its tests in late 2013, though the exact timing is unclear since it depends on the date of the European exercise, which has not yet been set.
Finance Minister Michael Noonan hinted at the compromise speaking to Reuters in Switzerland on Thursday, where he said the Irish tests would be “in close proximity to” the European ones, a softening of his previous stance.
At a review of the Irish bailout this week, Irish officials told representatives from the European Commission, the European Central Bank and the IMF that they had already begun preparatory work with the banks and Blackrock, and were ready to hold stress tests by the end of the year.
Reuters
