Permanent TSB chief executive Jeremy Masding said Irish banks would need more capital should they become overly lax on mortgage debt forgiveness and variable-loan interest rates fall below those assumed in stress tests.
Exceptional or unusual rules in relation to debt forgiveness "would have a material impact on customer repayment behaviour and the calculations underlying the stress tests would have to be completely recalculated leading to a huge increase in the amounts of capital required across the banks," Mr Masding said in an e-mail to members of a parliamentary committee, obtained by Bloomberg News.
The e-mail's authenticity was confirmed by Ray Gordon, a spokesman for the bank. Permanent TSB's capital needs would also increase if its standard variable mortgage interest rates were outside assumptions used in banking stress tests last year, Masding said.
The bank has cut its Irish standard variable rate by 85 basis points since May, though it remains among the most expensive among the country's lenders.
