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IRISH BANKS WILL be tested to see if they could withstand a 21 per cent fall in property prices as part of European Banking Association stress tests.
The tests will be run later this year to help determine whether the European banking sector can survive huge shocks like those experienced during the collapse of the financial system in 2008.
The doomsday scenario cooked up by the EBA includes a total decline of 14.8 per cent in EU GDP between now and 2016. Unemployment would rocket under the adverse scenario, climbing by 0.6 per cent in 2014, 1.9 per cent in 2015, and 2.9 per cent in 2016.
The EBA is testing against those risks that it considers most likely to occur over the coming years. These include:
In a statement today, the EBA said that it will run the rule over 124 EU banks which cover at least 50 per cent of each national banking sector. The Irish banks to be assessed are Bank of Ireland, AIB, and Permanent TSB.
EBA chairperson Andrea Enria said that the testing methodology “will ensure a robust and effective tool for supervisors to address remaining vulnerabilities in the EU banking sector.”
She said that transparency will be “key to its credibility” and promised that the stress tests will provide a common approach to determining the next steps to be taken by supervisors and banks.
The results of the stress tests will be published in October 2014.
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Any chance they’d carry out a stress test on the Irish people! Because we’re completely at the end if out tether.
I think our stress has been tested plenty already.
# of our
Peak oil, peak oil, peak oil, peak oil.
The party is over boys and girls, because of peak oil.
Mathematically speaking the US dollar has already collapsed, its lost almost 95% of its purchasing power in the last 70 years and the devaluation is increasing daily as the federal reserve keeps printing money at faster and faster rates using quantitative easing. The brown stuff will hit the fan as soon as the general public realise this and lose faith in pieces of paper with no intrinsic value behind them, it could create a domino effect across all fiat currencies and would be reminiscent of the hyperinflation that occurred in Zimbabwe and the weimar republic.
The banks will not only fail if prices decline by 21%, they will fail if property prices do not rise appreciably from where they are now.
Cormac Lucey has pointed out recently that Ireland’s banks have continued to hemorrhage reserves since the beginning of the crisis and their only hope of salvation is another bubble. The US has been relying on consecutive bubbles to keep the lights on for decades, since before the dot-com bubble. The problem is that successive bubbles need to be larger and don’t last as long as the preceding bubble.
“Worse still, seven years into the recession the big banks are still losing vast amounts, before provisions for bad debts. That hole in the balance sheets is getting worse, not better.”
http://businessetc.thejournal.ie/readme/michael-noonan-house-prices-damien-kiberd-1410085-Apr2014/
“The wavelike movement affecting the economic system, the recurrence of periods of boom which are followed by periods of depression, is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion.
There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”
Ludwig von Mises, 1953
21% is OPTIMISTIC. Irish property is vastly overpriced still.
I don’t think so Steve.
I forgot, Paddy loves mortgages.
Too right it was overpriced to start with! The only people rising house prices benefit are developers,banks and estate agents. Oh and the lovely stamp duty for the government. They’re the only ones to say this is good. Expect another bubble in a few years!
We have failed to implement policy that would stop property prices rising because it would affect how the government could take money from people’s pockets via the LPT. All the nations eggs are in the property basket and if we are honest about the true price of property the country is broke. All the commentary about property speaks about the price in 2007 when as we all know it was way over valued. Let’s get honest and talk about the price in ’95 before the bubble.
And if the answer is No, that’s more money from us?
You can be sure of that.
The answer is no. Irish banks are more insolvent than is publicised.
But property prices have indeed fallen more than 21%.
The spin,
the manipulation,
the PR/Propaganda,
coming from the government, the banks, NAMA, the property industry and their vested interests is just trying to pretend that it’s not,
so they can create false panic and summon the heard yet again.
It makes no difference because the irish taxpayer is here to bail them out always
sure they have secuitised the productivity of working people for the next 30 years, lob on another few years why not? Ireland isnt a country anymore its a bondholder’s SPV.
And if the banks don’t pass the stress tests, will there then be a raid on deposits?
More than likely yes.
I can only make one kind of deposit but ,it would also create a lot of interest ,boi
Most European countries and the US have sneakily passed legislation allowing them to take depositors money.
Noonan is laissez faire about the housing market because he thinks a mini bubble will help the banks get through stress tests.
Oil prices are heading up over Syria and Ukraine and there is nothing we can do to protect our economy from external shocks. The Zombie banks are about to receive a shot in the head.
I remember the days when “Nationalise the Banks” was a joke, not a policy.
“She said that transparency will be key to its credibility”
Well that’s the credibility of the stress tests completely goosed then.
OK only an idiot or someone loaded would buy property in Ireland now.
Unless you have the funds to take the hit when the markets collapses again, don’t saddle yourself with a mortgage.
I smell a rat!
The likelihood of the market collapsing a further 21% would be near impossible.
The depreciation in value on a Nationwide basis since 2008, is in excess ( in actual sale terms , not asking prices ) of 50% .
If one is to analyse the value drop,by leaving out the Dublin and surrounding areas, it is about 70% depreciation in sale values , throughout the rest of the Country.
I’m sure they said the same in 2006.
Why, because double property crashes never occur? Well, I suppose they haven’t happened since all the way back in the 1990s, and even then that was all the way away in the UK.
Property prices should always be, and in the LR always are, linked to average income, inclusive of unemployment etc. Average industrial wage is in the region of 35k, net-adjusted disposable is about 20k. Is 10x average income sustainable for an average house price?
Also, 1996-2007 witnessed property price increases of c.270%. So just to get back to 1996 prices would require a drop of about 73% on 2007 prices. And as I’m sure you’re aware, markets tend to over correct in times of crisis, so an 80% drop on 07 prices shouldn’t be viewed as at all extreme, greater drops are certainly possible if not probable.
No bias there so Real Estate Alliance?
Norman – I’ve been a Chartered Surveyor for more the forty years.
I never witnessed the rediculous “bubble” like the one from 1992-2007 .
In 2006 , people like us spoke out, that a crash was coming and we were shouted down by Brian Cowan and Bertie Ahern .
We forecasted the “crash” and FF and their satellites didn’t want to know .
The reckless lending policy of ALL the Banks and a Government and Opposition , who failed to know or who didn’t want to know.
The reduction in values has been monstrous since then – in our area , anything up to 75% , depending on location.
The room for a further reduction in value is no longer there – annually , as the people with cash in their pockets are now lifting the value, that’s truly there presently .
Until the Banks start to lend again , only these type of buyers will have the market to themselves .
We do not offer Repossessed Family homes for sale and we never will !
Sorry, you’ve still not even attempted to explain why property price reductions hit a wall at c.75%. Are you basing this on anything? As a long term property player surely you remember falls of over 90% in residential property in Japan in the 90s – some areas are estimated to have lost over 99% of their value in 15 years following the ’89 crash.
Without you justifying why there is no more room for devaluation in Irish property I imagine most people will have the sense to trust empirical & historical evidence which contradict you.
Silent – I’m offering an opinion.
I don’t have access to anything except recent factual evidence and current actual statistics of sales.
I always say to Clients to be very wary of the likes of Daft.ie “Surveys” , as they only offer the stats on “Asking Prices” and not actual selling prices !
At least nowadays one can now download a simple Free App on your mobile – “Price Register” – which enables everyone to check and compare Actual Sale Prices in your favoured area.
This is, in its own way at least , in a long held view of mine that only true transparency in values should be available to all!
As I stated in my earlier contribution, the market has started to improve – albeit from a very low base and the past year has seen more sales , then in the previous four years combined .
This is essentially fuelling my opinions.
In our profession we can only deal in facts and comparison .
Hope my explanation is helpful ?
We all know the skulduggery that estate agents were engaged in back in the day (I.e phantom bids / price pumping etc). The only fair way to ensure that people don’t overpay for property is have a closed bid system. People wouldn’t be so quick to inflate the price of a property if lets say 1. Every bid was available for view on a website 2. A mortgage was contingent on the average price of the property (based bid prices).
The Truth Hurts – please, at least take the time to read my contributions, before launching an attack on my personal credibility and my profession ?
I can assure you – just as in most walks of life , that not everyone , is as you infer !
I know of very decent , hardworking and honourable persons , who always carry out their duties, in an entirely credible manner and not as you describe !
What do they care? They have the tax payer to bail them out since we own most of them!
We’re fine down in Cork ,boi . no new bubbles down our way , no stress either
Banking schmanking
What a waste of time and money of course they can kenny and his sheep will look after them
Could they f**k!
Did we not already pass all the stress tests before, during and after the boom. Sure didnt all the great financial instuitions give our banks the green light, what is there to worry about? Be happy, dont worry,be happy.
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