Regulatory Capital Derogations - 07/05/10

Anglo Irish Bank Corporation Limited (“the Bank”) reported in its Annual Report & Accounts for the 15 months to 31 December 2009 that the Financial Regulator had granted certain derogations until 30 April 2010 or such shorter period if the Bank's capital ratios were restored to a level compliant with capital ratio requirements in place prior to the granting of these derogations.

In light of the Government's continued support and its commitment to provide an appropriate level of capital to the Bank to enable it to continue to meet its capital requirements, the Financial Regulator on 30 April 2010, at the request of the Bank, on a temporary basis and in exceptional circumstances, exercised its discretion to continue to set the Bank’s minimum total capital ratio at 8%, being the minimum requirement as set out in the Capital Requirements Directive, and to grant derogations from the following requirements previously applicable to the Bank:

  • that Tier 1 capital comprises at least 50% of the Bank's regulatory capital;
  • that lower Tier 2 capital cannot exceed 50% of Tier 1 capital;
  • that Core Tier 1 capital must be, at a minimum, 4% of risk weighted assets;
  • that collective provisions included in Tier 2 capital cannot exceed 1.25% of risk weighted assets;
  • to apply a risk weight of 150% to certain Irish commercial property loans advanced prior to 31 October 2009; and
  • to deduct €169m from Total capital.

The above derogations apply to all regulatory returns submitted from 30 April 2010 and have been granted until 31 May 2010 or such shorter period if the Bank's capital ratios are restored to a level adequate to enable it to comply with its existing capital ratio requirements in place prior to the granting of these derogations. The necessity of a further extension of the derogations beyond end May will be subject to review by the Financial Regulator at that time.

Full details of the Financial Regulator's derogations are as follows:

  1. The minimum total capital requirement for credit institutions is 8% as set down by Regulation 19 of the European Communities (Capital Adequacy of Credit Institutions) Regulations 2006 (SI No. 661 of 2006) (the 'CRD Regulations'). The Financial Regulator has imposed a higher minimum total capital ratio requirement of 9.5% on the Bank. This requirement shall be reduced from 9.5% to 8%.
  2. Under Regulation 11(6) of the CRD Regulations the Bank is authorised to exceed the limits set out in Regulation 11(1).
  3. The Financial Regulator's requirements in relation to Own Funds as set out in paragraph 3.2.1 (i) and (ii) of BSD S 1/04, Notice to Credit Institutions (Alternative Capital Instruments: Eligibility as Tier 1 Capital) shall not apply to the Bank.
  4. In accordance with the national discretion provisions afforded to member states under Annex VI of the Capital Requirements Directive 2006/48/EC the Financial Regulator imposed a risk weighting of 150% to speculative commercial real estate with effect from 1 January 2007. This is as set out in paragraph 2.2, Type A Discretions (ref 20) of the Financial Regulator's notice on Implementation of the CRD (28 December 2006) (the 'Implementation Notice'). This shall be amended in the case of the Bank to 100% in respect of the value of all exposures as at 31 October 2009 meeting the definition of speculative commercial real estate as defined in the Implementation Notice. Any increase in such exposures after that date or any new exposures arising after that date meeting the definition of speculative commercial real estate shall continue to have a risk weighting of 150%.
  5. The Financial Regulator has in place a restriction on the level of general provisions that may be included in Tier 2 of 1.25% of risk weighted assets, as set forth in Paragraph 2.2 (iv) of the Financial Regulator's notice BSD S 1/00. This limit of 1.25% shall not apply to the Bank.
  6. The Financial Regulator grants a derogation from the requirement, set out in its letter of 25 July 2008, to make a deduction of €169m from Total Own Funds.

-Ends-

7 May 2010

Billy Murphy/ Martha Kavanagh
Drury Communications
Tel: + 353 1 260 5000

John West / Jeremy Carey
Tavistock Communications
Tel: +44 20 7920 3150