Basel III, pensions and the recapitalisation of Irish banks

An Saoi: Wednesday’s Financial Times had a very interesting article on proposed changes in banking rules under Basel III. Sensibly, the Bank of International Settlements is proposing that pension deficits should be deducted when calculating net Tier One capital. The pension obligations are long-term liabilities and should of course be deducted from core assets, as they are a core liability.

British Banks are up in arms over the proposal as many have huge deficits. What is the position of the Irish banks?

Bank of Ireland had a deficit of €1,478M at 31st March 2009 and Allied Irish Banks admitted to a deficit €1,263M at 30th June 2009. It appears that these two banks will require perhaps a further €3,000M, on top of current estimates, which the Government and the Governor of the Central Bank has glossed over to date. Certainly the failure of Dr. Honohan to bring the BIS’s proposal to the attention of the Irish public in his utterances about recapitalisation raises many questions in relation to his impartiality.

This additional cost to ensure that the pensions of the fat cats who got us into this trouble are secured is surely one step too far?

Posted in: Banking and finance • Welfare

Tagged with: pensions • banking