Stress Test of European Banks 2016

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.

Austria

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).

France

Two largest French banks, Societe Generale and BNP Paribas showed the CET1 ratios for the adverse scenario below the euro area average (9.2%).

Germany

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.

Ireland

Allied Irish Banks (AIB) and Bank of Ireland (BoI) are among the weakest test performers. CET1 for the adverse scenario is 4.31% (AIB) and 6.15% (BoI).

Italy

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.

Spain

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 United Kingdom

Barclays Bank performed the worst among the tested British bank, followed by The Royal Bank of Scotland: CET1 for the adverse scenario is 7.3% (Barclays) and 8.1% (RBS).

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.

Nordic Countries

Scandinavian banks (the banks from Denmark, Finland, Norway and Sweden) showed strong capital positions for both the baseline and adverse scenarios.

Fully Loaded CET1 Ratio

NameStarting 2015Baseline 2018Adverse 2018Country
Banca Monte dei Paschi di Siena S.p.a.12.07%12.24%‐2.44%Italy
Allied Irish Banks, Plc13.11%13.9%4.31%Ireland
Raiffeisen Zentralbank Österreich AG10.2%12.33%6.12%Austria
Bank of Ireland11.28%15.03%6.15%Ireland
Banco Popular Espanol10.2%13.45%6.62%Spain
Unicredit Spa10.38%11.47%7.1%Italy
Barclays Bank plc11.35%12.48%7.3%United Kingdom
Commerzbank AG12.13%13.13%7.42%Germany
Société Générale S.A.10.91%11.61%7.5%France
Deutsche Bank AG11.11%12.08%7.8%Germany
CaixaBank, S.A.9.65%10.97%7.81%Spain
Erste Group Bank AG12.25%13.55%8.02%Austria
Banco de Sabadell, S.A.11.72%12.81%8.04%Spain
NATWEST MARKETS PLC15.53%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
Bayerische Landesbank11.99%12.41%8.34%Germany
BNP Paribas10.87%12.09%8.51%France
Norddeutsche Landesbank - Girozentrale -12.09%13.16%8.62%Germany
HSBC Bank plc11.87%12.41%8.76%United Kingdom
Unione di Banche Italiane SpA 11.62%13.01%8.85%Italy
ING Bank NV12.7%12.5%8.98%Netherlands
Banco Popolare - SC12.39%14.61%9%Italy
OTP Bank Nyrt12.94%14.56%9.22%Hungary
Landesbank Baden-Württemberg15.98%15.58%9.4%Germany
BPCE12.78%14.36%9.47%France
DekaBank Deutsche Girozentrale13.5%14.17%9.53%Germany
ABN AMRO Bank NV15.44%16.2%9.53%Netherlands
Volkswagen Bank GmbH11.67%12.9%9.55%Germany
Bankia, S.A.13.74%14.42%9.58%Spain
La Banque Postale14.51%14.95%9.82%France
Landesbank Hessen-Thüringen GZ13.11%14.42%10.1%Germany
Lloyds Bank Plc13.05%16.44%10.14%United Kingdom
Intesa Sanpaolo S.p.a.12.47%12.8%10.21%Italy
Groupe Crédit Agricole13.68%14.81%10.49%France
KBC Bank14.88%16.18%11.27%Belgium
Belfius Banque SA14.65%17.6%11.41%Belgium
Powszechna Kasa Oszczędności Bank Polski S.A.13.42%14.73%11.44%Poland
Groupe Crédit Mutuel15.55%16.62%13.38%France
Nykredit Realkredit19.19%22.03%13.86%Denmark
Jyske Bank16%19.84%13.99%Denmark
Danske Bank15.48%17.66%14.02%Denmark
Nordea Bank AB16.45%18.6%14.09%Sweden
DNB BANK ASA14.31%16.56%14.3%Norway
OP Yrityspankki Oyj19.16%20.92%14.61%Finland
Skandinaviska Enskilda Banken AB18.85%21.55%16.6%Sweden
BNG Bank NV26.17%28.05%17.62%Netherlands
Svenska Handelsbanken AB21.25%23.09%18.55%Sweden
Swedbank AB25.08%27.47%23.05%Sweden
NRW.BANK42.54%39.44%35.4%Germany
 

External Links

  1. 2016 EU-wide stress test results