November 10, 2017 / 1:53 PM / 14 days ago

Ireland's PTSB no longer required to hold extra capital buffer

DUBLIN (Reuters) - Irish mortgage lender permanent tsb (PTSB) (IL0A.I), which has reduced the size of its loan book, will not have to hold an extra buffer of capital from 2019 because it is no longer large enough to be considered a systemically important bank, Ireland’s Central Bank said on Friday.

Like other European banks, Irish lenders identified as systemically important to the domestic economy due to their size and market share have to hold additional capital to increase their ability to withstand losses on their lending.

The Central Bank began applying the new rules in 2015 and last year added PTSB to its list, setting the amount of extra capital it had to set aside at 0.25 percent of risk-weighted assets from July 2019, rising to 0.5 percent a year later.

PTSB, the smallest of Ireland’s three domestically-owned lenders which is more exposed to the cost of regulation than its rivals, completed a deleveraging programme last year by selling the remains of its mortgage book in the United Kingdom.

The Central Bank kept the mark for the other two larger domestic banks, Allied Irish Banks (ALBK.I) and Bank of Ireland (BIRG.I), at 1.5 percent, to be phased in at a rate of 0.5 percent per year from July 2019.

It also increased the buffer set to be applied to Citigroup (C.N) by 2021 to 1 percent from 0.5 percent previously due to “its increased importance”. It will be introduced at 0.25 percent in 2019 and 0.5 percent in 2020.

Citigroup shifted the head office of its European retail banking operation to Dublin from London in 2015.

The buffers for RBS’s Irish retail unit Ulster Bank and UniCredit’s (CRDI.MI) Irish subsidiary, which is primarily involved in structured finance and treasury activities, were unchanged at 0.5 percent and 0.25 percent respectively.

The buffers for Other Systemically Important Institutions (O-SIIs) can be set at between 0 and 2.5 percent and are aimed at protecting lenders from potential losses related to excessive credit growth.

Ireland’s banks required the euro zone’s costliest state bailout following a 2008 property crash, with inadequate regulation identified as one of the causes.

Reporting by Padraic HalpinEditing by Greg Mahlich

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