Financial Regulator says Irish Life & Permanent will have to raise an

additional €145m of Core Tier 1 capital

By Finfacts Team
Sep 10, 2010 - 4:30:18 PM

The Central Bank and Financial Regulator has today published the results of its Prudential
Capital Assessment Review (PCAR) for Irish Life & Permanent plc (ILP) for the three years
until 2012 and the financial group will have to raise an additional €145m of Core Tier 1 capital.

The Financial Regulator said these capital levels are being set for the ILP consolidated
group, which is covered under the government guarantee, to ensure that it can withstand
future losses, even under very stressed conditions. In addition the Central Bank and Financial
Regulator has also applied the Committee of European Banking Supervisors (CEBS) stress
test methodology to ILP.

Findings of the Prudential Capital Assessment Review

The capital level is consistent with the new capital requirements announced for other Irish
credit institutions in March 2010 and will ensure that ILP strengthens its capital position.

The PCAR has been undertaken to determine the recapitalisation requirements of the credit
institution with reference to a base case and a stress case:

Irish Life & Permanent plc is not required to raise any additional capital in respect of the base
case, as it meets the 8% Core Tier 1 and the 7% Equity Tier 1 requirement under the base
case, but is required to raise an additional €145m of Core Tier 1 capital to meet the stress
case target of 4% Core Tier 1.

The capital requirement must be in place by the 31st May 2011. This level of capital must be
met after taking account of all future profits and losses and will be principally in the form of
equity. Equity is considered the highest quality form of capital, and the emerging international
standard. In addition, further amounts are added on in the calculation of future loan losses.
The requirements also mean that ILP cannot go below a level of 4% core tier 1 capital in a
severely stressed scenario. ILP will be required to submit its recapitalisation plan to the
Central Bank and Financial Regulator within 30 days.

ILP Statement

In a statement, ILP confirmed that if the bank and the life company are separated as has
been proposed as part of its current offer for the EBS, it estimates that €925m of capital would
be needed to recapitalise the bank, Permanent tsb on a stand alone basis. ILP said it
envisages that this would be funded from internal resources, a liability buy back programme
and an external capital raising exercise.