Association of German Banks on new bank stress test
20 March 2011
The EBA's decision to use core tier 1 capital as the basis for this year's bank stress test is not appropriate in the view of the German private banks.
On 18 March 2011, the European Banking Authority (EBA) unveiled the official criteria for Europe's upcoming bank stress test, in which 13 banks in Germany will participate. The EBA's decision to use core tier 1 capital as the basis for this year's bank stress test is not appropriate in the view of the German private banks. It means applying a measure of capital which is not yet valid, effectively bringing forward the introduction of Basel III rules. Supervisors decided to implement the new definitions of capital in stages for a good reason. It would therefore make better sense for the test to recognise instruments that are eligible and available to absorb potential losses during the period that will be tested, i.e. 2011 and 2012.
It should also be borne in mind that the test is a hypothetical scenario and not a basis for deriving concrete capital requirements for banks. True, the test will provide valuable information about the banking system's basic resilience to stress. But it would be wrong to assume that it will allow conclusions to be drawn about whether or not an individual bank has a sustainable business model. Nor should the stress test trigger a tightening of the capital requirements currently enshrined in law.
Press release
© BDB - Bundesverband Deutscher Banken
