Cantillon: Noonan and Elderfield on the same page in an inglorious chapter

Bank stress tests and capital requirements were in the news again this week with seemingly different views on the need for more funding from the Government and the financial regulator.

On Thursday, it emerged that the Irish banks won’t face a fresh round of stress tests until some time in the first half of next year. They had been pencilled in for later this year, ahead of our likely exit from the EU-IMF bailout programme.

These tests will now take place just ahead of a Europe-wide round of bank testing takes place. This will please the banks as they have enough on their plates at the minute sorting out their mortgage arrears and other difficulties.

At the launch of the new Irish Strategic Investment Fund in Grangegorman, Minister for Finance Michael Noonan stated that our banks wouldn't need any new capital as a result of the stress tests as they have sufficient buffers in place.

Taxpayers across Ireland breathed a huge sigh of relief as this means they won’t have to pony up any more cash to the banks, which have already drained the exchequer of €64 billion since the economy crashed in 2008.

Earlier on Thursday, soon-to-depart deputy governor of the Central Bank Matthew Elderfield told the Public Accounts Committee that the banks would need some fresh capital of the order of €6 billion, largely due to Basel III global financial reporting rules that will alter the way financial institutions will account for their capital.

These rules will be phased in over a number of years so there is unlikely to be an immediate requirement for new capital for Irish banks. This was a view supported by ratings agency Fitch in a note on Ireland this week.

Elderfield said the new funding could come from bank profits (they are all hoping to return to the black in 2014), new capital being raised by the institutions or funding from the European Stability Mechanism, if that is up and running by then.

It would seem Noonan and Elderfield are on the same page in regard to all this. Getting the banks through their stress test next year will hopefully conclude an unglorious chapter of our history.