In March 2010, the Financial Regulator completed a Prudential Capital Assessment Review (‘PCAR’) for Bank of Ireland in order to assess its capital requirements. The PCAR assessed the capital requirements arising for expected base and potential stressed loan losses, and other financial developments, over a 3 year (2010-2012) time horizon.
As a result of this review, the Financial Regulator determined that Bank of Ireland needed to raise an additional €2.66bn of equity capital by 31 December 2010 to meet a base case target of 8% Core Tier 1 (including a 7% Equity Tier 1 component) and a stress target of 4% Core Tier 1. In June 2010, Bank of Ireland raised net additional equity capital of €2.94bn. As a result, Bank of Ireland has exceeded the capital raising obligations of the PCAR.
In July 2010, Bank of Ireland was subject to the 2010 EU-wide stress testing exercise co-ordinated by the Committee of European Banking Supervisors (‘CEBS’), in co-operation with the European Central Bank (‘ECB’), and under the supervision of the Central Bank and Financial Regulator.
The objective of the CEBS stress test, which was conducted on a bank-by-bank basis, is to assess the overall resilience of the EU banking sector and the banks’ ability to absorb further possible shocks on credit and market risks, including sovereign risks.
The exercise was conducted using the scenarios, methodology and key assumptions provided by CEBS (see the aggregate report published on the CEBS website*).
Bank of Ireland has passed the stress test. Under the adverse scenario including the additional sovereign shock, Bank of Ireland’s estimated Tier 1 capital ratio would be 7.1% at 31 December 2011 which is 1.1% or €933m in excess of the threshold of 6% Tier 1 capital ratio agreed exclusively for the purpose of this exercise.
For further information, please contact:
Group Chief Financial Officer
+353 (0) 76 623 4703
Director of Group Finance
+353 (0) 1 637 8141
Head of Group Corporate Communications
+353 (0) 76 623 4770
Forward Looking Statement
The July 2010 Committee of European Banking Supervisors (CEBS) stress tests were carried out under a number of key common simplifying assumptions (principally those mandated by the CEBS) (e.g. constant balance sheet, uniform treatment of securitisation exposures). Accordingly the information relative to the benchmark scenario is provided only for comparison purposes and should in no way be construed as a forecast of future capital ratios or levels of future impairments or other financial measures. However, this document contains certain statements that may be considered forward looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934 and Section 27A of the US Securities Act of 1933 with respect to the application of scenarios, methodology and key assumptions provided by CEBS, to Total Tier 1 capital, total regulatory capital and total risk weighted assets as of 31 December 2011. These forward looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward looking statements sometimes use words such as ‘aim’, ‘anticipate’, ‘target’,’expect’,’estimate’,’intend’,’plan’,’goal’,’believe’, or other words of similar meaning. Examples of forward looking statements include among others, statements in respect of stress scenarios (being benchmark scenario, adverse scenario and additional sovereign shock on adverse scenario) as of 31 December 2011. Because such statements are inherently subject to risks and uncertainties, actual results and other financial data may differ materially from those expressed or implied by such forward looking statements. Such risks and uncertainties include, but are not limited to, risks and uncertainties relating to the performance of the Irish and UK economies, property market conditions in Ireland and the UK, costs of funding, the performance and volatility of international capital markets, the expected level of credit defaults, the impact of the National Asset Management Agency, the Group’s ability to expand certain of its activities, development and implementation of the Group’s strategy, including the ability to achieve estimated cost reductions, competition, the Group’s ability to address information technology issues, and the availability of funding sources. Any forward looking statements speak only as at the date they are made. The Group does not undertake to release publicly any revision to these forward looking statements to reflect events, circumstances or unanticipated events occurring after the date hereof. The reader should however, consult any additional disclosures that the Group has made or may make in documents filed or submitted or may file or submit to the US Securities and Exchange Commission.