Regulator waives capital rules for EBS


The Financial Regulator has waived capital rules for EBS allowing the building society to fall below the threshold dictating the minimum amount of capital that a financial institution must hold in reserve.

EBS said in a statement that the regulator has granted the building society a temporary derogation until May 31st allowing it to hold less than the minimum core tier 1 capital ratio of 4 per cent.

The building society said that the need for the temporary derogation arose from the transfer of assets to the National Asset Management Agency (Nama) occurring before the recapitalisation of EBS by the Minister for Finance.

“In light of the Minister’s confirmed support and the commitment to provide an appropriate level of capital to EBS and the fact that absent the derogation, EBS would be in breach of minimum regulatory capital requirements until such time as the capital referred to above is provided by the Minister, the Financial Regulator has granted the derogation,” said the building society.

“EBS is in active discussions with the Minister regarding the provision of capital from the State and expects to receive the capital shortly,” said the building society.

The institution is transferring about €150 million in loans to Nama, starting tomorrow, out of a total of about €800 million that it will move to the agency. EBS is facing a discount of about 35 per cent on the first loans, which would leave the building society with a loss of about €54 million on the first tranche of transfers.

The institution had previously said that it would need up to €400 million in additional capital to cover losses incurred on the transfer of its Nama loans. However, the regulator’s stress test on non-Nama loans and the higher capital demands set by the regulator for the end of this year will increase the capital requirement substantially.

The regulator is expected to announce tomorrow evening that it has given financial institutions until the end of the year to bring their core equity tier 1 ratio – a measure of the most loss-absorbing capital at a bank – to 7 per cent.

The announcement will be made following a statement from Nama showing the losses on the first loans transferred from EBS, Irish Nationwide and Bank of Ireland.

The statement will be made before the Minister for Finance Brian Lenihan tells the Dáil tomorrow evening how much the five institutions participating in Nama will require in additional capital and how large a stake the State will be taking in each of the institutions.