Irish banks 'meet capital requirements' - Cowen

Irish banks covered by the capital guarantee scheme all met the “regulatory capital requirements as of September 30th” the Taoiseach…

Irish banks covered by the capital guarantee scheme all met the “regulatory capital requirements as of September 30th” the Taoiseach Brian Cowen told the Dail today.

The finding came from a report by PricewaterhouseCoopers into the scale of bad debts on the loan books of the six lenders covered by the Government's guarantee scheme which was ordered by the Financial Regulator more than a month ago.

However, Mr Cowen admitted "international expectations in relation to capital levels in the banking sector have altered" and said meeting these expectations may be "challenging with consequences for the sector and the wider economy", adding there was no single solution to the problem.

Mr Cowen said the Government expects covered institutions to explore the potential for meeting these capital needs through "raising private capital and the disposal of appropriate assets".

In the Dail today Mr Cowen said the report "demonstrates under a number of stress scenarios that capital levels in the covered institutions will remain above regulatory levels in the period to 2011."

Asked if there would be a bank recapitalisation, Mr Cowen said: "The Government are considering all options in relation to these matters".

The Minister for Finance Brian Lenihan held meetings with the Financial Regulator and the Central Bank last night after Irish banking stocks came under renewed pressure in recent days with shares in Bank of Ireland and Anglo Irish Bank both falling below €1.

The Government is in discussions with a number of international private investors about injecting fresh capital into Irish banks.

Mr Cowen said there was no one solution that could provide a "panacea for all ills".

Speaking to reporters in Dublin this afternoon the Minister for Finance Brian Lenihan said the Government has been approached by overseas investors about injecting fresh capital into Irish banks.

"Informal approaches" have been made to the Government by several potential investors, Mr Lenihan said, although he declined to give any names.

The Irish Times today reported the Government has been approached by JC Flowers & Co and Sandler O'Neill & Partners LP.

"It is not the function of the government to fund or bail the banks," Mr Lenihan said. "It is of course desirable the banks access private funds in the first instance to deal with their capital and liquidity issues."

Anna Lalor, analyst at Goodbody Stockbrokers said the "pace of something happening has stepped up a gear,"

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The core tier one capital ratios - a key buffer watched by investors showing a bank's ability to cope with future losses - at the State's three main banks stand at about 6 per cent, well in excess of minimum regulatory requirements of 4.25 per cent.

Stock market investors had previously viewed the 6 per cent core tier one ratio as sufficient for the banks. However, since state injections of capital into UK banks, which raised their core tier one ratios to between 8 per cent and 8.5 per cent, pressure has grown on the Irish banks to add to their capital.

Analysts estimate that AIB, Bank of Ireland and Anglo Irish Bank would need more than €6 billion combined to bring them above the 8 per cent mark, though AIB said in a trading statement earlier this month that it was aiming to grow its capital ratio to at least 7 per cent "over time".

Shares in Irish banks soared this morning reversing some of their recent heavy losses, with Anglo Irish Bank up 33.2 per cent higher at €1.07.

Bank of Ireland was nearly 12.7 per cent higher at €1.05. Both shares had earlier traded down below €1.

"It's very much retail investors buying into speculation in the press today of some sort of restructuring of the Irish banks," one trader said.

Last week Bank of Ireland chief executive Brian Goggin said he could not rule out raising equity, but it was not on the agenda at that moment.

Additional reporting agencies