On the 31st Mach 2011, the Central Bank of Ireland published the results of the Prudential Capital Assessment Review (PCAR) and Prudential Liquidity Assessment Review (PLAR). These tests formed part of the Financial Measures Programme Report (FMPR), the aim of which was to place the Irish banking system in a position where it could fund itself and generate capital without further undue reliance on Irish or European public sources. Full details of the outcomes for IL&PGH and for other Irish banks are available from the Central Bank of Ireland.
The reviews have identified a gross capital requirement of €4.0bn for the group’s banking business in order to meet the requirements of the Central Bank to
| (i) |
achieve the target core equity Tier 1 capital ratio of 6% (plus an additional buffer) in the Stress Case scenario and |
| (ii) |
cover the losses associated with the requirement to de-leverage the bank's balance sheet in order to achieve a loan to deposit ratio of approximately 122.5%. |
The outcome of the PCAR / PLAR exercise has had fundamental implications for the group. Some €2.3bn of the total equity capital requirement of €3.6bn has been provided by the State and the injection of this capital on July 27th 2011 resulted in the State acquiring a 99.2% stake in the group. On the same day, the State also subscribed €0.4bn by way of contingent debt capital. The balance of equity capital is being raised from a combination of internal sources, a liability management exercise in relation to Tier 2 debt and from the sale of the group’s life assurance and fund management business. The liability management exercise (LME) was completed in August 2011 and the sale process for the life and fund management business was conducted in the 2nd half of 2011 but was suspended due to market conditions.