Page 69 - EBA 2015.1815 Annual report 2014 web 2

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2 0 1 4 a n n u a l r e p o r t
Box 5 — 2014 EBA EU-wide stress test and AQR exercises
The 2014 stress test included 123 banking groups from across the EU and Nor-
way with a total of EUR 28 000 billion of assets covering more than 70 % of total
EU banking assets.
The impact of the stress test was assessed in terms of the transitional CRR/
CRD IV CET1 Capital ratio for which a 5.5 % and 8.0 % hurdle rate were defined
for the adverse and the baseline scenario respectively. The weighted average
CET1 Capital ratio as of end 2013 was 11.1 % and in the adverse scenario it was
projected to fall by approximately 260 bps mostly driven by credit losses.
24 participating banks fell below the defined thresholds leading to an aggre-
gate maximum capital shortfall of EUR 24.6 billion. Nonetheless, the additional
capital raised in 2014 by banks with a shortfall reduced the capital needs for
those banks to EUR 9.5 billion and the number of banks with a shortfall to 14.
The supervisory reaction for individual banks based on these results was the
responsibility of competent authorities.
When concerning the capital preservation recommendation, the majority of the
banks, 48 out of a list of 56 banks subject to the recommendation, reported
a frontloaded CET1 ratio above the 7 %. This is the minimum required by the
new regulatory framework on a fully loaded basis plus the capital conservation
buffer. Two of the remaining eight banks had been waived from the floor requi-
site since they are under restructuring.
0 %
2 %
4 %
6 %
8 %
10 %
12 %
14 %
16 %
Starting 2013 for stress test
Operating profit before impairments
Impairment financial assets designated at fair value
through P&L
Accumulated other comprehensive income -
sovereign exposure in AFS portfolio
Transitional adjustments
Impairment non-financial assets
Total risk exposure amount
Impairment financial assets other than instruments
designated at fair value through P&L
Adverse 2016
11.1 %
8.5 %
Figure 21: Drivers of the impact in CET1 Capital ratio from 2013 to 2016 in the
adverse scenario