On 17 June 2010, the heads of state or government of the European Union resolved to publish results of the EU-wide stress tests carried out by the Committee of European Banking Supervisors (CEBS) in cooperation with the national supervisory authorities and the ECB. The objective of the stress test exercise was to make transparent the resilience of the European banking system in the event of an economic downturn and of negative financial market developments (in particular, a drop in the value of European government bonds).
· German banks prove to be robust and resilient;
· Average Tier 1 capital ratio of the German banking system up by almost 2 percentage points in the last three years;
· Solvency assured, with Tier 1 capital ratio just over 8.9%, even given sharp decline in growth and shifts in the yield curve;
· In addition, German banks cope very well with the simulated drop in government bonds prices paired with rise in risk premiums, Tier 1 capital ratio in this scenario 8.5%; and
· HRE is the only German bank to fall short of the 6% tier 1 capital ratio in the most severe stress scenario.
At the same time, the number of tested countries and banks compared with the first ever stress test conducted at CEBS level last year increased considerably. A total of 91 credit institutions from 20 member countries took part in this EU-wide stress test exercise, representing 65% of the EU banking system in terms of total assets. The 14 participating banks from Germany represent more than 60% of the total assets of the German banking system – including UniCredit Bank AG, which participated in the consolidated stress test of its Italian parent.
It must be borne in mind that stress tests constitute only hypothetical (“what if”) analyses of negative developments. As such, they must not be confused with forecasts of future capital requirements. Similarly, the markets' expectation that the banks – differentiated by business structure – show higher Tier 1 capital ratios than those called for under regulatory requirements refer to the banks' actual Tier 1 capital base and not to the imputed capital ratios calculated according to the stress tests.
© BaFin
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