Mario Draghi says the Budget remains under threat because of question marks over the future of the banks.
He said tests of the banks’ balance sheets earlier this month are only a measure of their current strength – and not whether they could withstand more shocks to the economy.
He said that more comprehensive tests would be needed next year to determine if the banks would need yet more support.
Fianna Fáil Finance spokesperson Michael McGrath has called for an urgent response from the Central Bank to today’s comments from ECB President Mario Draghi that the Irish banking sector remains “a source of some concern with outstanding issues requiring swift and decisive action.”
“I recently called for the full publication of the Central Bank’s balance sheet assessment of the Irish banks. The findings were given to the troika on November 29th but the level of information published to date has been totally inadequate. It is unacceptable that we remain in the dark as to what exactly the Central Bank discovered during their assessment of the banks.
“Based on the comments of Mario Draghi today there are some items of significance contained in these reports which will require action on the part of the banks. The problem for people assessing the health of the Irish banks, both investors and those who wish to carry out business with them, is that we do not know the nature and extent of the issues to which the ECB President refers.
“This is an extraordinary situation and can only be addressed by the Central Bank providing a detailed report on their findings in respect of AIB, Permanent TSB and Bank of Ireland. What I found quite disconcerting was the apparent wide divergence between the capital levels calculated by Bank of Ireland when they applied their own methodology when compared to the methodology preferred by the Central Bank itself.
“While we have exited the EU / IMF programme we need to remember that the future health of the economy is inextricably linked to the banks. Under-capitalised banks are a threat to economic recovery as they risk starving businesses of much needed credit.
“The Central Bank needs to urgently address the information gap that currently exists and I am calling on Patrick Honohan to provide clarity as to whether the Central Bank will be instructing the banks to take additional provisions against bad loans and if further capital will be required in both expected and adverse scenarios.”