The European Banking Authority (EBA) today announces the publication date for the EU wide stress test which will take place on Friday, 15 July 2011.
The EU wide stress test 2011 is being carried out on 91 banks which represent 65% of total assets of the banking sector and is one of a number of important supervisory tools. The test assesses the resilience of European banks to a hypothetical adverse scenario and uses a common, conservative stress testing benchmark for European banks. The test is being applied consistently across participating banks as part of a coordinated EU wide effort to improve transparency, identify vulnerabilities, inform policymakers and ensure appropriate measures are taken to address possible deficiencies.
In line with guidance from the European Securities and Markets Authority (ESMA) the announcement of the results will take place in three phases:
- Summary results will be published first by the EBA at 6pm CEST (5pm BST)
- Publication by individual banks of their results as well as of credit and sovereign exposures using the EBA disclosure template will take place at 6pm CEST (5pm BST)
- Re-publication by national supervisory authorities of bank by bank national results will follow from 6.01pm CEST (5.01pm BST) to 6.29 pm CEST (5.29 BST) with full bank specific results re-published by the EBA at 6.30pm CEST (5.30pm BST)
The stress test has been carried out on a static balance sheet as of December 2010 over a two year time horizon. Key features of the stress test for 2011 include:
- A new consistent capital benchmark of 5 per cent core tier 1 (CT1)
- A common baseline and adverse scenario developed by the European Commission and ECB respectively, combined with common assumptions and definitions to ensure consistency
- A quality assurance and peer review process carried out by EBA staff assisted by a team of experts from national supervisory authorities, the European Central Bank and the European Systemic Risk Board. During this process, additional guidance was sent out to banks early in June to address shortcomings and over-optimism of some banks’ preliminary estimates.
The presentation of the results will also include clear disclosure of credit and sovereign exposures.
The results will be published by the EBA, national authorities and banks using the EBA disclosure templates
The results and supporting disclosures will include:
- The result of the stress test under the static balance sheet as of December 2010 and a detailed description of the capital make up at that time.
- The impact of existing mitigating measures which will strengthen the capital base at 2012 as a result of committed equity raisings, and mandatory restructuring plans announced and fully committed by 30 April 2011.
- Management decisions and actions where necessary to strengthen balance sheets and additional mitigating measures which do not fall into the above category but which will serve to improve the capital position by end 2012.
The EBA expects the presentation of results to be accompanied by the announcement of relevant backstop measures for banks falling below the threshold and banks that may be deemed to have vulnerabilities or perceived by markets to be at risk.
Invitation to the Press Conference at the EBA will be issued shortly. Attendance is by pre-registration only and will take place at 6:30pm CEST (5:30pm BST) following the publication of the summary results.