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РBУAБNРKИINКGА
Igor Davkov
The holds a PhD in the field of
monetary economics and finance
EU WIDE STRESS
TEST 2016
At the end of July this year, level before the test in 2011.
the EBA (European Banking The stress test was conducted on
Agency) announced the re-
sults from this year’s stress a sample of 51 banks, of which 37 are
test of the European banks. from the countries of the Eurozone un-
This stress test differs from the previ- der the regulation of the ECB, while 14
ous ones considering the fact that it banks come from the countries of the
didn’t define the so called target capital EEA (Denmark, Norway, Sweden, Hun-
adequacy ratio (hurdle rate) according gary, Poland and the United Kingdom).
to which the banks would have to re- The banks covered with the test cost
capitalize within the agreed deadlines more than 70% of the total bank assets
with the ECB. which are covered in the process. The
test includes only the banks whose bal-
Starting from 2011, when the first ance sheets on a consolidated basis are
stress-test was conducted, the banks an amount of more than 30 billion Eu-
are experiencing a continuous process ros. This criterion is consistent with the
of recapitalization. Hence, only in the basic criterion which the ECB has into
period from December 2013, the capital consideration in the definition of the
of the banks which were subject to the banks which are important for the sys-
stress test has increased for approxi- tem. It is obvious that the sample cov-
mately 180 billion Euros. Hence, an ered with this test is significantly below
initial assessment of the results before the sample which was covered with the
conducting the stress test was that the previous one from 2014 when it covered
banks in general are appropriately capi- 123 banks. What should be noted is that
talized. The starting point of the EBA the test did not include banks from the
before the implementation of the stress most vulnerable EU economies such as:
test was the average capital adequacy Greece, Cyprus and Portugal. Further-
ratio i.e. the hurdle rate (CET1) of 13.2%. more, the test does not include a signif-
Just to compare, this level of capital- icant number of smaller banks, which
ization of banks is 2 percentage points leaves space for speculations in terms
above the level before the test in 2014, of the future effect of the designed mac-
which is 4 percentage points above the roeconomic scenario on these banks.
38 September 2016
