Well it’s the very last day of May 2011 and despite rumours that they would have been published sooner, the governor of the Central Bank of Ireland, Patrick Honohan confirmed yesterday with the launch of the Bank’s annual report that the stress test results would at last be published today. Minister Noonan had previously said that he didn’t expect anything “untoward” to arise with the stress tests. Governor Honohan repeated those sentiments yesterday. To date Anglo has received €29.3bn of public funds, mostly via promissory notes and Irish Nationwide Building Society (INBS) has received €5.4bn, again mostly in promissory notes. BlackRock is again central to these latest stress tests, with the hope being that the independentUS asset manager giant will lend the results the credibility that has been lacking in the past. The previous stress testing results for AIB, Bank of Ireland, EBS and Irish Life and Permanent were published on 31st March,, 2011 and identified an need for an additional €24bn of capital, some of which might be secured by banks convincing certain subordinated bondholders to accept a haircut or a debt-for-equity sway. The IMF/EU bailout last November 2010 earmarked a maximum of €35bn for additional capital injections to the banks.
There will be coverage here later when the stress test results are unveiled.
UPDATE (1): 31st May, 2011. RTE is reporting that the stress tests show pre-existing estimates for capital requirements were adequate, that is €29.3bn for Anglo and €5.4bn for INBS. The CBI has not yet issued any general release setting out the results in detail. Expected shortly.
UPDATE (2): 31st May, 2011. The Central Bank has now published its report on Anglo and INBS. As far as Anglo was concerned the latest stress test was not as comprehensive as applied to the other financial institutions in March 2011. That was because the IMF, EU and ECB agreed to waive the requirement for a comprehensive review and because PwC had undertaken what was considered to be a complete review for the Department of Finance, and that review was “current”. The so-called addendum to the March 2011 stress tests – called the Addendum to the Financial Measures Programme report – is here.
NAMA Wine Lake 
One very important (and often overlooked) aspect of these stress test exercises is the final ‘deliberations’ by the decision makers. I’ve gone through similar exercises where a CEO is presented with a large array of possible outcomes for loss provisions and chooses one he can live with.
By way of example, Cliff Taylor had an article on this in last Sunday’s Business Post:
“The amount which the government had to commit to invest in the banks was substantially increased in frantic negotiations that took place in the 24 hours before the bank recapitalisation was announced at the end of March, The Sunday Business Post has established.
The EU, IMF and ECB insisted the figure for bank recapitalisation be increased to €24 billion, believed to be €4 to €5 billion above what the government felt was necessary, on the basis of an assessment for the Central Bank by international consultants BlackRock.”
http://www.sbpost.ie/news/ireland/bank-recapitalisation-fund-was-hiked-by-4bn-to-5bn-at-last-minute-56595.html
This ‘last minute’ haggling was somewhat lost in the robust presentation/justification of the 31 March stress test and recapitalisation results. Even if the government had managed to put €5 billion less in, we’d still probably have seen a similarly show of prudence in action. One positive element from March is that we got to see some of the Blackrock numbers. The rationalisation for gap between Blackrock’s numbers and what the central bank went for should be questioned again in light of Cliff Taylor’s article.
And so to today’s results, bear in mind the new projected losses will be ones that the authorities can live with.
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There go those pigs flying by my window again.
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