PTSB defends liquidity after €2.5m ECB fine
It marks the first time a eurozone-based bank has been sanctioned in this regard since the ECB took over responsibility for regulating the region’s banks, and preventing another financial crash, three years ago.
PTSB — which is 75%-owned by the State — said the fine had been paid and the breaches had not harmed its liquidity levels.
The ECB said it fined PTSB €750,000 after a failure to comply with “specific liquidity requirements” requested by Frankfurt in early 2015. This breach occurred between October 27 and December 31, 2015. It added that a further fine, of €1.75m, was imposed after further breaches occurred between early January and late April of last year.
The breaches related to PTSB’s liquidity coverage ratio (LCR) — the levels of quality liquid assets banks need in order to meet their short-term obligations — and the Dublin-based banking group has blamed a “misinterpretation” of revised regulations for the issue, which has now concluded.
PTSB said, yesterday, that it has been fully compliant in LCR terms since the end of April 2016.
“The group had a liquidity buffer of around €4bn at the time these breaches occurred and the group’s actual liquidity position was not impacted during the period between October 2015 and April 2016. The current value of the group’s liquidity buffer is in excess of €6.5bn,” a spokesman for the bank said yesterday.
The ECB also noted that PTSB’s liquidity position had not been altered by the breaches and that the bank has fully remediated the issue. PTSB said, last month, that it is still receiving medium-term ECB funding, but its short-term funding reliance is now zero, illustrating its ability to fund itself in the immediate term.
An ECB spokesperson refused to comment on other similar cases but did not seem to suggest like-minded sanctions were pending for the other Irish banks.
Bloomberg recently reported that Irish banks are facing “mounting pressure” from European regulators to write off their bad loans and that patience is wearing thin, with urgent solutions likely to be sought if convincing plans are not laid out.
Bank of Ireland recently said it was not anticipating any regulatory action from Europe, with just 10% of its loans currently classed as non-performing. AIB has said it is focusing on reducing its impaired loan levels more in line with its European peers and that all options as to how to accomplish that are being reviewed.
Last month, PTSB said that 28% of its loan book was non-performing, but said it aims to reduce that to below 10% in the medium-term. It called its non-performing loan levels “unsustainably high” and that all options — including loan sales, higher repayment requirements and home repossessions — were all on the table.
Bad loans remain a €900bn burden on Europe’s banking sector and a millstone crimping economic growth. They remain concentrated unevenly among countries, with Ireland still among the worst affected.
In Spain, Banco Popular Espanol collapsed earlier this year under a mountain of bad property debt and was sold for €1 in a European-brokered fire sale.
Additional reporting
Bloomberg
