Irish banks may need additional capital after stress tests are completed should the economic environment worsen "significantly beyond scenarios envisaged under the tests", the European Commission said today.
The commission said €10 billion have been earmarked for immediate injection into banks under "prudent assumptions", with a further €25 billion available under Ireland's aid program for banks "in case further unforeseen losses were to be revealed".
The Brussels-based commission commented today in an e-mailed statement on Ireland's economic adjustment program.
The Government will complete stress tests on lenders by the end of March and has agreed as part of the €85 billion bailout program agreed with the EU and IMF to force banks to sell off assets to lower their dependence on central-bank funding.
"The envisaged financial-sector deleveraging may in turn be hampered by market conditions that could prevent asset sales," the commission said.
Irish economic growth may be weaker than currently projected, especially over the coming months, according to the commission. "Domestic demand developments could be more unfavourable than projected if positive confidence effects kick in very gradually, or if lending activity remains subdued on account of slower-than-expected restructuring in the financial sector," it said.
Bloomberg
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