2 August 2016
On Friday, 29 July 2016, European Banking Authority (EBA) published the results of EU-wide stress test of the largest European banks. Like the previous stress tests conducted in 2014 and 2011, the stress test 2016 has the purpose to assess the resilience of large EU banks and the EU banking system to adverse economic shocks. EBA analysed the banks' capital ratios and operating income components under two scenarios over a 3‐year time‐horizon: baseline and adverse (macroeconomic downturn scenario).
However, the 2016 stress test has several differences compared to the previous tests.
Coverage. The stress test 2016 assessed 51 banks from 15 EU and EEA countries: 37 from euro area countries and 14 from Denmark, Hungary, Norway, Poland, Sweden and the UK. The 2014 stress test included 123 banking groups across the EU and Norway, covering more than 70% of total EU banking assets. Reducing the number of the covered banks, EBA on the one hand focused on a more homogeneous sample of large banks, to ensure greater comparability while retaining almost the same coverage of EU banking assets. On the other hand, EBA managed to exclude the troubled banks from Greece, Cyprus and Portugal.
Threshold. 2016 EU‐wide stress test does not contain a pass/fail threshold and is designed to be used as a crucial input into the Supervisory Review and Evaluation Process (SREP). SREP is going to be conducted by National Competent Authorities later in 2016.
The stress test 2016 results for selected banks and countries are highlighted below.
Among the tested banks, Raiffeisen Bank ended the third-worst performing bank, with the common equity tier one (CET1) ratio for the adverse scenario being 6.12%. The second Austrian tested bank Erste Group Bank showed CET1 8.02% for the adverse scenario (12th-weakest result).
Two largest German banks, Deutsche Bank and Commerzbank performed relatively poor: CET1 for the baseline scenario was 12.13% (Coba) and 11.11% (DeuBa), while for the adverse scenario it was 7.42% and 7.8% respectively.
4 German regional banks (Landesbanken) covered by the stress test, showed the results close to the euro area average.
The largest Italian bank by assets UniCredit Bank showed CET1 ratio for the adverse scenario 7.1%, which is the sixth weakest result.
CET1 ratio of Banca Monte dei Paschi di Siena for the adverse scenario was -2.44%, meaning that the bank would be insolvent. This is the worst result of the 51 banks. Banca Monte dei Paschi di Siena also failed the 2014 stress test.
Intesa Sanpaolo, the second largest Italian bank appeared to be the most strongly capitalized Italian bank, showing CET1 of 12.8% and 10.21% for the baseline and adverse scenarios respectively.
Out of six tested Spanish banks, Banco Popular Español showed the worst results: CET1 ratio was 13.45% for the baseline scenario and 6.62% for the adverse scenario, making the bank fifth-worst bank of the test.
The third UK bank, HSBC Bank, showed CET1 8.76% for the adverse scenario. The best capitalized British bank, Lloyds Bank, ended with CET1 10.14% for the adverse scenario and 16.44% for the baseline scenario.
Scandinavian banks (the banks from Denmark, Finland, Norway and Sweden) showed strong capital positions for both the baseline and adverse scenarios.
|Name||Starting 2015||Baseline 2018||Adverse 2018||Country|
|Banca Monte dei Paschi di Siena S.p.a.||12.07%||12.24%||‐2.44%||Italy|
|Allied Irish Banks, Plc||13.11%||13.9%||4.31%||Ireland|
|Raiffeisen Zentralbank Österreich AG||10.2%||12.33%||6.12%||Austria|
|Bank of Ireland||11.28%||15.03%||6.15%||Ireland|
|Banco Popular Espanol||10.2%||13.45%||6.62%||Spain|
|Barclays Bank plc||11.35%||12.48%||7.3%||United Kingdom|
|Société Générale S.A.||10.91%||11.61%||7.5%||France|
|Deutsche Bank AG||11.11%||12.08%||7.8%||Germany|
|Erste Group Bank AG||12.25%||13.55%||8.02%||Austria|
|Banco de Sabadell, S.A.||11.72%||12.81%||8.04%||Spain|
|NATWEST MARKETS PLC||15.53%||15.89%||8.08%||United Kingdom|
|Coöperatieve Rabobank U.A.||11.97%||13.33%||8.1%||Netherlands|
|Banco Bilbao Vizcaya Argentaria, S.A.||10.27%||12.03%||8.19%||Spain|
|Banco Santander, S.A.||10.19%||13.17%||8.2%||Spain|
|Norddeutsche Landesbank - Girozentrale -||12.09%||13.16%||8.62%||Germany|
|HSBC Bank plc||11.87%||12.41%||8.76%||United Kingdom|
|Unione di Banche Italiane SpA||11.62%||13.01%||8.85%||Italy|
|ING Bank NV||12.7%||12.5%||8.98%||Netherlands|
|Banco Popolare - SC||12.39%||14.61%||9%||Italy|
|OTP Bank Nyrt||12.94%||14.56%||9.22%||Hungary|
|DekaBank Deutsche Girozentrale||13.5%||14.17%||9.53%||Germany|
|ABN AMRO Bank NV||15.44%||16.2%||9.53%||Netherlands|
|Volkswagen Bank GmbH||11.67%||12.9%||9.55%||Germany|
|La Banque Postale||14.51%||14.95%||9.82%||France|
|Landesbank Hessen-Thüringen GZ||13.11%||14.42%||10.1%||Germany|
|Lloyds Banking Group (Solo)||13.05%||16.44%||10.14%||United Kingdom|
|Intesa Sanpaolo S.p.a.||12.47%||12.8%||10.21%||Italy|
|Groupe Crédit Agricole||13.68%||14.81%||10.49%||France|
|Belfius Banque SA||14.65%||17.6%||11.41%||Belgium|
|Powszechna Kasa Oszczędności Bank Polski S.A.||13.42%||14.73%||11.44%||Poland|
|Groupe Crédit Mutuel||15.55%||16.62%||13.38%||France|
|Nordea Bank AB||16.45%||18.6%||14.09%||Sweden|
|DNB BANK ASA||14.31%||16.56%||14.3%||Norway|
|OP Yrityspankki Oyj||19.16%||20.92%||14.61%||Finland|
|Skandinaviska Enskilda Banken AB||18.85%||21.55%||16.6%||Sweden|
|BNG Bank NV||26.17%||28.05%||17.62%||Netherlands|
|Svenska Handelsbanken AB||21.25%||23.09%||18.55%||Sweden|