Five Irish banks included in ECB stress test trawl
Bank of Ireland, AIB, Ulster Bank Ireland, Permanent TSB and Merrill Lynch International Bank included
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The European Central Bank has outlined today how it plans to scrutinise top euro zone lenders before becoming their supervisor in a new role that puts its credibility on the line.
Irish institutions to be tested include Bank of Ireland, AIB, Ulster Bank Ireland, Permanent TSB and Merrill Lynch International Bank, which has its headquarters here, as well as the Central Bank.
The ECB wants to unearth potential risks hidden in balance sheets before supervision is centralised under its roof from November 2014 as part of a European banking union drawn up in response to a debt crisis exacerbated by massive bad property loans in countries like Ireland and Spain.
Setting out its plans to scrutinise the 128 top euro zone lenders, the ECB said it would use tougher new measures set out by Europe's top regulator - the European Banking Authority (EBA) - in the asset quality review it will conduct next year.
"A single comprehensive assessment, uniformly applied to all significant banks, accounting for about 85pc of the euro area banking system, is an important step forward for Europe and for the future of the euro area economy," ECB President Mario Draghi said.
"We expect that this assessment will strengthen private sector confidence in the soundness of euro area banks and in the quality of their balance sheets," he said.
The ECB said it would conclude its assessment in October 2014, before assuming its supervisory tasks in November although some policymakers have suggested that timing could slip.
If capital shortfalls are identified, banks will be required to make up for them, the ECB said. Draghi has said a "public backstop" must also be available.
A provisional list of banks to be reviewed includes 24 German banks, 16 in Spain, 15 in Italy, 13 in France, seven in the Netherlands, five in Ireland and four each in Greece, Cyprus and Portugal.
The Bundesbank and Bafin, which in Germany share banking supervision, said German banks were "already intensively preparing for the comprehensive assessment".
Detailing the measures it will use in its review, the ECB said it would use the EBA's definition which says bank loans more than 90 days overdue are non-performing.