- The EBA has performed an EU-wide stress test which has resulted in a CET1 capital ratio of 9.53% at year-end 2018 under the adverse scenario
- The stress test does not contain a pass or fail threshold
- The regulator will use the result of the stress test in the upcoming SREP process
Today the European Banking Authority (EBA) published the results of the 2016 EU-wide stress test for European banks. For ABN AMRO the stress test resulted in a CET1 capital ratio of 16.21% under the baseline scenario and in a CET1 capital ratio of 9.53% under the adverse scenario, both at year-end 2018.
The stress test is designed by regulators and will be used to set capital requirements as part of the upcoming Supervisory Review and Evaluation Process (SREP). It allows the regulator to assess the minimum and additional own funds requirements under stressed scenarios based on a common methodology and assumptions. It further supports the regulator in discussing risk mitigating actions. The stress test also aims to enhance transparency among banks. This stress test does not contain a pass or fail threshold.
Scenarios and assumptions
The baseline and adverse scenarios as well as the methodological assumptions were determined by the regulators and applied to all EU banks in scope. The assumptions applied in the stress test methodology were conservative and hypothetical and had a significant impact on the outcome.
In the baseline scenario the main assumptions negatively affected net interest income in particular, which nevertheless resulted in a small increase of the CET1 ratio to 16.21%. In the adverse scenario the effects of the methodological assumptions were larger, also impacting loan impairments and credit risk-weighted assets, which resulted in a decline of the CET1 ratio to 9.53%. The static balance sheet assumption does not allow for new loan origination and risk mitigating actions, whereas the floors on interest rates of liabilities and caps on interest rates of assets result in a decline in net interest income. The scenarios and assumptions applied in the stress test are therefore not a forecast of ABN AMRO’s results or the capital developments.
|Starting point||EBA EU-wide stress test results|
Based on the SREP of 2015, the minimum (Pillar I) and additional own funds (Pillar II) requirements for ABN AMRO, the CET1 requirement in 2018 would be 7.625% , . In both scenarios ABN AMRO meets this requirement. ABN AMRO continues to aim for strong capital ratios, even under stress, as part of its moderate risk profile.
The regulator is expected to review the SREP and the total SREP capital requirement later this year, among other things based on this stress test.
This press release is made public with reference to article 17 paragraph 1 of Regulation (EU) 596/2014
1 The SREP of 2015 requires a CET1 of 9.5% in 2016, including a capital conservation buffer which phases in over four years by 0.625% p/a. In 2018 this buffer will have phased in to 1.875%. The minimum (Pillar I) and additional own funds (Pillar II) requirements result in a CET1 of 7.625%.
2 Please note that this requirement is calculated for reference purposes. The regulator is expected to review the Pillar II requirement in the annual SREP process. The actual requirements in 2018 could therefore differ from the pro forma 2018 requirement as used in this press release.