Per­ma­nent TSB test short­fall to be be­tween ¤800m and ¤1bn

The Irish Times - Friday - The Ticket - - BUSINESS NEWS - CIARÁN HAN­COCK Fi­nance Cor­re­spon­dent

Per­ma­nent TSB’s cap­i­tal short­fall aris­ing from Euro­pean Cen­tral Bank stress tests will be be­tween ¤800 mil­lion and ¤1 bil­lion, The Ir­ish Times has learned.

PTSB, which is 99.2 per cent owned by the State, will fail the ad­verse sce­nario case of the stress test when the re­sults are pub­lished on Sun­day.

PTSB will have two weeks to sub­mit a plan to the new Sin­gle Su­per­vi­sory Mech­a­nism, which as­sumes reg­u­la­tory over­sight for the euro zone on Novem­ber 4th, out­lin­ing how it in­tends to plug the hole in its cap­i­tal buf­fer. It will have un­til the end of July next year to put the fund­ing in place.

PTSB will not have to raise the full amount iden­ti­fied by the ECB on Sun­day. The fig­ure an­nounced by the ECB will be a gross num­ber.

PTSB will then be able to net off up to ¤400 mil­lion worth of con­tin­gent cap­i­tal notes, or Co­Cos as they are bet­ter known, held by the State as part of the bank’s ¤2.7 bil­lion bailout.

Prop­er­ty­mar­ket In ad­di­tion, it will likely be al­lowed to fac­tor into its plan ac­tions that it has taken this year, such as the sale of its Spring­board sub-prime mort­gage book, along with pro­vi­sion write­backs that re­flect the up­turn in the Ir­ish econ­omy and prop­erty mar­ket.

PTSB will seek to raise what­ever cap­i­tal it needs from the mar­kets, with Deutsche Bank en­gaged to seek out po­ten­tial in­vestors. The State is another pos­si­ble source of fund­ing but Min­is­ter for Fi­nance Michael Noo­nan last week said he ex­pected PTSB to raise what­ever fund­ing it needs from pri­vate sources.

As part of the as­set qual­ity re­view un­der­taken for the com­pre­hen­sive as­sess­ment ex­er­cise by the ECB and the Euro­pean Bank­ing Au­thor­ity, some 1,100 PTSB debtor files were as­sessed, along with 4,400 col­lat­eral items.

As PTSB has not yet re­ceived ap­proval for its re­struc- tur­ing plan its stress test was done on the ba­sis of a static bal­ance sheet based on year-end 2013.

This meant that in ap­ply­ing the stress sce­nar­ios into the fu­ture the bank was re­quired to main­tain the same business mix and as­set and li­a­bil­ity pro­file in terms of qual­ity and ma­tu­rity that it had at the end of last year.

By com­par­i­son, the dy­namic bal­ance sheet cal­cu­la­tions al­lowed cer­tain ex­emp­tions from the static rules to re­flect the terms of the re­struc­tur­ing plans agreed with the com­mis­sion. This ap­plies to vary­ing de­grees to Bank of Ire­land and AIB.

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