BoI and AIB wouldn't pass stress test
It's no secret that US banks have been undergoing stress tests to see if they might need to raise extra capital. But analysts at Keefe, Bruyette & Woods have devised a similar method to assess the state of European banks. And guess what? Ireland's big two are among the handful theoretically needing extra cash.
Just six banks fall below the 4% equity tier 1 ratio, meaning they'll require a minimum of €8bn to get above the hurdle rate. Among them - Bank of Ireland and Allied Irish Bank...
However, KBW adds:
In reality, more banks could need to raise capital as our stress test only covers traditional loan portfolios and does not stress for higher losses on securities portfolios. Longer term, we continue to believe that banks will require larger capital buffers, but that this will be built up over several years organically, through lower dividends/buybacks.
