New Basel III Requirement - Bad News for the Irish "Banks"

pocketdooz

With the Irish banks having a tough enough time under Basel II, these new strict capital requirements under Basel III will mean that there is an even higher likelihood of total government ownership of the banks over the medium term.

Under the agreements reached, the minimum requirement for common equity, the highest form of loss absorbing capital, will be raised from the current 2% level, before the application of regulatory adjustments, to 4.5% after the application of stricter adjustments. This will be phased in by from 2013 - 2019. The Tier 1 capital requirement, which includes common equity and other qualifying financial instruments based on stricter criteria, will increase from 4% to 6% over the same period.

More bad news for the Irish banks imo

Any thoughts ??

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RR2026

Hi The new requirements, will demand banks hold top-quality capital totaling 7 percent of their risk-bearing assets, but a long lead-in time eased fears that lenders will have to rush to raise capital .Basel III changes would push AIB's capital deficit to €4.5bn from its earlier forecast of €2.4bn and Bank of Ireland's from €1.5bn to €2.7bn. The new capital ratio represents a substantial increase from the current requirement of 2 percent, but is significantly lower than what banks had feared earlier this year and comes with a phase-in period extending in part to January 2019.

hmmm

The Irish regulator asked the banks to meet a 7% ratio some months ago.

Jim2007

It's important to keep a bit of perspective here!

There are actually very few banks currently in a position to come even close the required levels, so the Irish banks are not much worse of than they were before the agreement.

In addition 9 to 10 years is a very long time in banking terms and if the Irish banks have not turned around well before that, Basel III will be the least of their worries!

The reality is that Basel III will have little impact on things in the short term, say the next 5 years or so....

Good luck with that,

Jim.

ranger4

Would imagine Downgrades made by so called ratings agencies would inflict more damage in short-medium term to irish banks which inturn benifits longterm institutional investors.