Ireland's central bank on Tuesday ordered lenders to use more conservative provisioning for bad loans and increase the frequency of disclosures to boost confidence in the financial sector.
The guidelines, which are expected to raise bad-loan provisions across the sector, were issued following Ireland's EU-IMF bailout after the near-collapse of the banking sector under the weight of property-related loan losses.
They should be used in the preparation of 2011 results of the four banks covered under a government guarantee -- Allied Irish Banks
Guidelines include a call for more conservative impairment triggers, including tougher estimates and assumptions on property prices, and more conservative assumptions with regard to domestic and international macroeconomic conditions.
We want to see financial statements prepared on a more conservative basis, with the impairment provisioning methodologies better aligned to economic realities, the central bank's director of credit institutions supervision Jonathan McMahon said in a statement.
This ought, over time, to encourage greater confidence in published financial statements.
The guidelines call on lenders to view requests for forbearance as an impairment trigger, and to separate loans where forbearance has been requested from other performing loans.
They single out the banks' non-core portfolios, currently being sold, as an area where tougher provisioning is needed.
(Reporting by Conor Humphries; Editing by Greg Mahlich and David Hulmes)