For each of the following transactions summarise the capital impact on the acquirer. Highlight the likely source of capital: Bank Capital and Asset Liability Assignment, BCU, Ireland

Question One

For each of the following transactions summarise the capital impact on the acquirer. Highlight the likely source of capital, the estimated quantum of capital required, and estimated capital ratios before and after the transaction.

• AIB acquisition of Ulster Bank performing commercial loans
• AIB acquisition of Ulster Bank performing tracker mortgage portfolio
• PTSB acquisition of Ulster Bank performing non-tracker mortgage portfolio.

Question Two

Compare and contrast the loan portfolios of AIB and Bank of Ireland at the end of 2021. All key information is contained in the 2021 YE Pillar III reports. In particular, you might want to address the following:

• Are there any obvious differences in portfolio composition?
• Are there any obvious differences in credit quality?
• Is there any evidence that one bank is more risk-averse than the other?

Question 3

Ultimately, capital and nothing else keep a bank safe. Money set aside for unexpected losses allows us to cope with the same. However, the banking industry places great confidence in the three lines of defense model to protect itself. Evaluate this methodology as it is generally applied today. Questions you might consider are listed below but feel free to add others.

• Are there specific situations in which the 3LOD approach is particularly effective?
• Are there specific situations in which the 3L0D approach is ineffective?
• Are there any obvious weaknesses in the 3L0D model?
• Can you propose improvements to the current approach?
• Relative to capital, does 3LOD add much value?

Question 4

For any Irish bank, and preferably the one you work in, outline the half-yearly changes in IFRS9 expected credit losses from H12019 to YE 2022. For each of the eight time periods, outline the key changes in provisions and drivers of the same. Present a coherent narrative of the expected credit loss journey over the four-year period.