'Stark reality' of bank losses
Madam, – Peter Mathews’s article (Opinion, September 9th) claims among other things that Bank of Ireland is severely undercapitalised. We respect Mr Mathews’s entitlement to his opinions. We would respectfully suggest that opinions should be informed by facts and when figures are quoted they should at least be factually accurate having been verified as such. A major plank of Mr Mathews’s thesis involves a calculation based on what he claims are €16 billion of loans transferring to Nama. This is factually incorrect. Total Bank of Ireland loans potentially eligible to transfer to Nama amount to €12 billion at December 31st, 2009 as per our audited accounts. This fundamental error of fact serves to undermine Mr Mathews’s analysis of Bank of Ireland.
Mr Mathews further dismisses what he terms as Bank of Ireland having “more or less raised the capital amount indicated as adequate last March” and questions its adequacy. This does not recognise what has actually happened. The Financial Regulator and Central Bank, in their Prudential Capital Assessment Review (PCAR), undertook a comprehensive stress-testing exercise which set out the capital requirements of various Irish financial institutions in March of this year and gave a deadline of the end of December to achieve these targets.
In Bank of Ireland’s case the Regulator set out an additional equity capital requirement of €2.66 billion. In June Bank of Ireland completed a successful capital programme raising a net €2.94 billion and now has capital ratios that exceed the requirements of the Financial Regulator. In July Bank of Ireland passed the stress test carried out by the Committee of European Banking Supervisors (CEBS). This was conducted throughout Europe on a bank-by-bank basis to assess the overall resilience of the EU banking sector and the banks’ ability to absorb further possible shocks on credit and market risks, including sovereign risks.
Mr Mathews makes a number of other assertions which are not supported, in the article, by any facts.
We note that this article appeared on the day after Moody’s upgraded Bank of Ireland’s bank financial strength rating (BFSR). We do not claim that rating agencies are infallible and we do not have an ability to influence their ratings. Nevertheless we note that Moody’s has had extensive access to Bank of Ireland’s financial records. Moody’s commented on the “greatly improved quality of the capital base” of Bank of Ireland. Although not the headline rating, it is very significant that this is the first underlying upgrade for an Irish financial institution for some time. – Yours, etc,