The banks plans for deleveraging

[Brendan Burgess]

The banks are going to deleverage by €70 billion over the next 3 years.

But at the same time they are going to be given targets for fresh lending into the economy.

So most of the deleveraging will presumably come from the sale of overseas assets.

John Moran of the Department of Finance is reported in today's [broken link removed] as saying

UP TO €25 billion worth of loans will be removed from the banks through repayments over the next three years, the Department of Finance official in charge of restructuring the banking sector has said.


Addressing an international banking conference, John Moran said this would form part of the €72 billion deleveraging of the banks. The lenders would still be able to lend €10 billion a year into the economy and still shrink the size of their businesses, he said.


...The banks will split into core divisions, lending into Ireland, and a non-core divisions, which will be sold off or run down over time.

So, it looks as if €25 billion will be repaid by Irish borrowers and €30 billion in fresh money will be lent out.

Mr Moran said it did not make sense to remove non-core assets out of the banks as it would create “too much operational risk” and lead to further capital losses.

This is in direct conflict with the Central Bank report which suggests that IL&P alone will face a loss of €2.2 billion through the sale of its UK loans. That is €2.2 billion on top of the provisions they are making for credit losses.