Fianna Fáil Finance spokesperson Michael McGrath has said the conclusion of the bank stress tests, which AIB and Bank of Ireland passed, should herald a new era in the Irish banking sector in which it moves beyond retrenchment and begins to lend again to viable companies with solid business plans.
Deputy McGrath stated, “We’ve had six years of crisis management, asset sales and capital raising by the Irish banks. This has diverted the resources of banks from servicing the needs of customers. I regularly hear of the frustration of business customers unable to secure credit from banks whose attention has been focused on their own survival.
“If the stress tests are to have value in the real world, they should usher in an era of normalised activity where well capitalised Irish banks offer competitive and prudent lending products to their personal and business customers. As I have stated in the case of Permanent TSB, the State must ensure the bank plays a key role in promoting a competitive landscape. The State must also safeguard the value of its investment to date.
“On a wider European front, the stress tests highlight two things. One is that the European authorities have been much slower in forcing banks to face up to their problems with bad loans. 85% of banks needed to revise up bad loan provisions wiping nearly €48 billion from the value of EU bank assets. Endless rounds of stress tests necessitating further rounds of recapitalisation undermine confidence in the sector. We need to be sure that we really have got in front of the problem on this occasion.
“The second notable point highlighted by the tests is the very weak state of many European economies, in particular Italy. The European response to the global financial crisis was half hearted when compared to the decisive fiscal and monetary policy shown by the US. The new Commission President Jean-Claude Juncker is proposing a substantial Europe wide fiscal stimulus. Enough time has been wasted talking about this already. Action is required to boost demand in the European economy alongside reform. Failure to do so will undo any benefits that flow from concluding the stress tests.”