The Central Bank is testing whether the Irish units of international banks have enough capital to cover loan losses.
The bank may ask the lenders to draw up plans showing how they will fill funding gaps.
Where our analysis indicates a possible capital shortfall, credit institutions will be required to prepare a capital plan to comply with any additional capital requirement specified,” the Central Bank said in its report published yesterday.
Similar tests applied by the Central Bank to Irish domestic banks this year left the country’s lenders in need of $43 billion in new capital.
Irish banks are now drawing up detailed business plans showing how they plan to raise capital to address the shortfall.
British banks invested in Irish real-estate developers at the height of the Celtic Tiger boom and are now writing down investments after the countrys property market collapsed.
Royal Bank of Scotland and Lloyds Banking Group have both injected cash into their Irish units.
The Central Bank is not expecting big numbers to come out of this”, spokesman Jonathan McMahon said. The process is expected to be completed by year end, he said. – (Bloomberg)