Banks need to restart lending activity following Stress Tests – Hayes

Following the release of the ECB Stress Test results today (Sunday), Brian Hayes, Fine Gael MEP for Dublin, said banks that have passed the tests must get lending activity back to normal levels.

“The Stress Tests have now assessed the level of risks as well as the quality and amount of capital which banks have. It is imperative that those banks which have passed the Stress Tests now start engaging in increased lending activity; this will encourage investment and stimulate growth right across the EU.

“Bank of Ireland and AIB both returned to profitability this year and PTSB is making progress towards profitability. But the underlying issue is that lending to businesses has continued at an extremely slow pace; this needs to change. An ISME survey carried out in June this year found that 52 per cent of businesses were declined bank credit applications in the previous 3 months. This is evidence of the ultra-cautious lending policies Irish banks have been employing in the run-up to the Stress Tests.

“The results show that 25 Eurozone banks failed the tests, including PTSB in Ireland. This does sound worrying but it is nothing we weren’t prepared for – it is no mystery that many Eurozone banks needed more capital. Irish banks are in a lot healthier state now than in 2011 when the Irish banking system was in turmoil.

“We should take stock of the success of the 2009 US Stress Tests which helped restore confidence to the banking system and enabled successful recapitalisation, particularly for stressed banks.

 “On November 4^th, the ECB will take over supervisory powers of the main banks in Ireland. The new Supervisory Mechanism will give a further boost to bank reform across the Eurozone by harmonising banking systems and practices and will put Irish banks are on a level playing field with European partners.”