Irish bank regulator says senior debt holders safe

Senior bond holders in Ireland's four remaining lenders won't have to take a hit to fill a 70 billion euro (60 billion pounds) capital hole in the parlous sector, the country's banking regulator said on Wednesday.

"The government has taken a clear decision that action will not be taken against the senior bond holders of these four institutions, as they represent the basis of the restructured banking system for the future," Matthew Elderfield, head of financial regulation at the Irish central bank told a Reuters Newsmaker event.

"There has been considerable debate about this point but the markets now have certainty about government policy," Elderfield said.

The government unveiled the huge price tag last week when the results of a new health check on its four remaining lenders showed they required an additional 24 billion euros to bulletproof them against future shocks.

Elderfield did not say what government policy was in relation to senior bonds in nationalised lenders Anglo Irish Bank and Irish Nationwide, which are being wound down.

Finance Minister Michael Noonan said last week that if either of those banks, which have already swallowed over 34 billion euros of capital between them, needed additional reserves he would consider imposing losses on their unsecured senior debt not covered by a state guarantee.

Some Irish politicians have wanted senior debt holders to help foot the bill despite the European Central Bank, which is helping to keep the country's lenders afloat, saying this would deepen jitters in Europe's bond markets.

Ireland's stress test of its banks is seen as tougher than a similar exercise being conducted by the European Union on some 90 banks from across the bloc but whether it draws a line under the country's banking crisis remains to be seen.

Elderfield said he will be far more intrusive in the banking sector in future, in particular there will be regular checks on how much liquidity or cash-like assets they have to ride any short-term turbulence in markets.

The Irish banks will have to submit a "detailed point-in-time liquidity profile" every quarter starting at the end of June.

Ireland's financial crisis was not solely caused by weak international bank capital and liquidity standards, he said.

"There were home grown elements too, where it is important that the central bank is prepared to act with more rigorous standards than prevail internationally," Elderfield said.

Source Reuters.
Reporting by Carmel Crimmins and Huw Jones; Editing by Hans Peters