AIB is on track to raise some required fresh capital through disposals but may struggle to minimise State ownership by selling in an uncertain market, the head of banking supervision said today.
The Government told the banks in March that they must find at least €22 billion by the end of 2010 to plug the holes left from transferring risky property loans to a "bad bank" scheme and to meet new regulatory requirements.
AIB needs to raise €7.4 billion and plans to sell its UK business, its majority stake in Poland's Bank Zachodni WBK and a minority stake in M&T Bank in the US.
"We are confident AIB is on track to meet its disposal target, the issue is around the valuation of those disposals," Jonathan McMahon, the assistant director general for financial institutions at the Central Bank said today.
“There is some uncertainty around that at the moment and clearly the amount of government support will in part depend on their ability to realise those assets to the value they think they can."
The Central Bank has already completed stress tests on the two main banks and Mr McMahon said that the same measures should be completed for Anglo, state owned Irish Nationwide building society and Irish Life & Permanent by September.
He added that some foreign-owned institutions may have to ask their parent groups for some marginal additional capital when their stress tests are finalised at the end of year.
"Clearly some of those institutions have loan loss profiles very similar to domestic banks so it would be surprising if there weren't additional capital needs," said Mr McMahon, who was hired this year as part of a wide regulatory overhaul.
Lloyds and BNP Paribas recently closed their Irish units but Royal Bank of Scotland, Dutch lender Rabobank, Belgian group KBC and Nordic giant Danske Bank still have a presence.
McMahon also said that he was confident Irish banks would be able to withstand any continued market woes, and exposures by any institution to the euro zone's troubled debt spots gave the regulator no cause for concern.
"Events in European markets have made it difficult for banks in the euro zone and we're satisfied currently that the measures banks are taking, the contingency plans they have will be adequate in the event that there were serious market problems."
Reuters