Annual Report & Accounts 2009 - Anglo Irish Bank

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Notes to the financial statements continued 53. Capital resources continued 142 Derogations from regulatory capital requirements The Bank’s regulatory capital position during the period to 31 December 2009 has benefited from derogations from certain regulatory capital requirements granted, following requests from the Bank, on a temporary basis by the Financial Regulator. These derogations have been granted in five tranches and full details of all derogations granted are provided below. The latest derogations are applicable until 30 April 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. On 26 March 2010 the Financial Regulator confirmed to the Bank that the temporary derogations were still in place at the end of March 2010. The following derogations were granted by the Financial Regulator, on a temporary basis and in exceptional circumstances, for all regulatory returns submitted with effect from 31 March 2009 until 31 July 2009 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: • that the Bank's minimum Total capital ratio be reduced from 9.5% to 8.0%; • 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 Core Tier 1 capital comprises at least 51% of Tier 1 capital; • that the total amount of innovative non-Core Tier 1 capital instruments is limited to 15% of Tier 1 capital; • 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 March 2009; and • to deduct €169m from Total capital. On 31 July 2009, the Financial Regulator extended the derogation that the Bank's minimum Total capital ratio be reduced from 9.5% to 8.0% until 31 December 2009. Furthermore, the derogation from the requirement that Core Tier 1 capital must be, at a minimum, 4% of risk weighted assets was extended until 7 August 2009 to enable the Bank to complete its liability management exercise. The Financial Regulator granted, effective from 31 December 2009, the following derogations on a temporary basis and in exceptional circumstances: • that the Bank's minimum Total capital ratio be reduced from 9.5% to 8.0%; • 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. Full details of the Financial Regulator's derogations applicable as at 31 December 2009 are as follows: (1) (2) (3) 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. While the Financial Regulator has already granted a derogation on the minimum required Total capital ratio from 9.5% to 8% until 31 December 2009, the timeline for this derogation is now extended to be consistent with that of the other derogations, i.e. up to a review of this decision at 30 April 2010. Under Regulation 11(6) of the CRD Regulations the Bank is authorised to exceed the limits set out in Regulation 11(1)(a) and Regulation 11(1)(b). 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) (5) (6) Regulatory capital - without derogations The Group 31 December 2009 €m Total Tier 1 capital 4,840 Tier 2 capital Anglo Irish Bank Annual Report & Accounts 2009 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%. 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. The Financial Regulator grants a waiver from the requirement, set out in its letter of 25 July 2008, to make a deduction of €169m from Total Own Funds. The following table provides details of the regulatory capital position of the Bank without the benefit of temporary derogations from certain regulatory capital requirements that were applicable at 31 December 2009. Collective provisions 939 Subordinated perpetual debt 47 Subordinated term debt 1,649 Total Tier 2 capital 2,635 Tier 1 and Tier 2 capital 7,475 Capital deductions (181) Total capital 7,294 Risk weighted assets 75,112 Tier 1 capital ratio 6.4% Total capital ratio 9.7% 143
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Annual Report & Accounts 2009
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Contents Page Chairman’s statemen
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Legacy matters The Bank is continui
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Jim Brydie was appointed Head of Gr
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Business review This business revie
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Divisional lending balances by sect
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holdings, reduced investment cash f
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30 September 2008. Average total cu
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Income statement - treasury impairm
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to acquire these assets they are in
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Board of Directors Donal O’Connor
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In keeping with our environmental p
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Principal risks and uncertainties T
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Credit risk Credit risk is the risk
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Report of the Directors The Directo
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Corporate governance statement On 1
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Corporate governance statement cont
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Independent Auditors' report to the
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Consolidated income statement For t
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Consolidated statement of financial
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Consolidated statement of changes i
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Statement of cash flows For the 15
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Notes to the financial statements I
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Notes to the financial statements c
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Annual Report & Accounts 2009 - Anglo Irish Bank

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