The results of the stress tests are being presented as an urgent and unexpected need for more capital to cover losses by the Irish banks. The reality is that the extra capital required is to protect the banks in the event that something highly unlikely might happen to our economy and society in the medium future. The assumptions underlying the stress tests are not realistic and, if applied in similar tests in other countries would undoubtedly foresee the theoretical failure of dozens, or hundreds, of banks across the UK, Europe and the US.

In our case, our attempt to predict a worst case scenario by using severely cautious assumptions, an attempt one suspects which is prompted more by the need to address our government’s loss of credibility in the last two years rather than that of our banks, is already being seen as reason for further sell off of bank shares and further loss of confidence in our banks. The fact that our Minister of Finance said today that he expects Irish bank paper to be further downgraded – this is being widely reported on the financial ticker tapes- is interpreted itself as a statement of lack of confidence in our banks by our own government !. (Of course this is not new, as we have had a Central Bank Governor stating from his first day in office that he would like to see our banks taken over for some token payments by any foreigners, even Chinese!)

Much of the damage done to our banks has been done by government policy and ill-considered statements by senior officials. The government guarantee, given in consideration of 70 bn takeover of banks assets, has proved to be prettry much worthless. The NAMA fiasco has wrecked participating banks and damaged sovereign credibility. The expectation that ECB could be tapped as a funder of the Irish bank rescue programme has proved to be embarrisingly ill-conceived. Some statements by officials have directly led to loss of deposits in the banks, and in reality the market has shown its opinion of the Irish Government’s guarantee for depositors by taking c. 100 bn euros out of our banks in the last six months

Its time for some PR, folks. If we can spend tens of millions on stress testing, why not spend 5 million or so countering negative reporting and interpretation in the financial markets? We should hire half a dozen foreign spokesmen, in Frankfurt, London, New York, Hong Kong, Paris, to help local journalists properly interpret what the reality is in Ireland, and support these by professionally produced factual data and other PR material in the local offices of the Irish Trade Board and IDA in the 30 countries or so where they operate.