Central Bank hires key Bank of England stress-testing figure

The Central Bank has hired the Bank of England's head of macro-financial risks division, Vasileios Madouros, as its next director of financial stability.

The appointment follows the retirement last month of Maurice McGuire, who was appointed to the then newly created role in late 2016.

Mr Madouros, holder of a bachelor of science degree in economics from the University of Warwick and a master's in economics from Birbeck College, University of London, will take up his new position in Dublin in January.

The Greek native played a key role in the development of a stress-testing regime for banks in the UK in the past four years.

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In his Central Bank role, Mr Madouros will be responsible for the leadership of the macro-financial division, resolution division for ailing financial firms, the Central Credit Register and markets-based finance and international relations. The director is a member of the Central Bank’s senior leadership team and leads a team of more than 70 staff.

Mr Madouros "brings extensive experience in risk assessment, the development and implementation of macro-prudential policy and stress-testing," said Sharon Donnery, a deputy governor at the Central Bank.

“His technical knowledge in central banking will greatly contribute to the leadership of policy, analytical work on sources of systemic risk in the financial system, as well as the actions we take to mitigate risk, including the orderly resolution of institutions.”

However, Mr Madouros will not be in situ when the results of the latest set of pan-European banking stress tests are revealed on November 2nd.

Worst performers

AIB and Bank of Ireland were among the worst performers in the last round of stress tests two years ago, as their capital levels were seen falling sharply under adverse economic scenarios used for the assessment. Like the 2016 examination, this year’s stress tests will not have a pass-fail threshold, though investors will be expected to punish firms that fare badly by selling off their shares and debt securities.

Analysts expect AIB and Bank of Ireland will do better in this year’s round of stress tests, as the banks have been building up their capital bases and as authorities are assessing for less onerous Irish scenarios.

This time round, stress testers are modelling for Irish house prices to fall 19.8 per cent behind a “baseline” scenario for 2020 in an adverse case, compared to 22.3 per cent price deviation in the 2016 assessment.

Meanwhile, this year’s adverse scenario for Irish commercial real-estate valuations is for a 21.8 per cent divergence, compared to 28.4 per cent the last time.