The 2015 exercise consisted of an asset quality review (AQR) and a stress test. It was similar to last year’s comprehensive assessment in terms of its scope and depth, given that the AQR and stress test were performed based on the methodologies applied in 2014. It constituted a prudential rather than an accounting exercise and the threshold ratios applied for identifying capital shortfalls were maintained at the same levels as in 2014: a Common Equity Tier 1 (CET1) ratio of 8% for the AQR and the stress test baseline scenario, and a CET1 ratio of 5.5% for the stress test adverse scenario. The CET1 ratio is a key measure of a bank’s financial soundness.

 

The AQR results served as a starting point for the stress test, which projected the evolution of banks’ capital positions over three years (2015-2017) under a baseline scenario and an adverse scenario. The adverse scenario projected a weighted average decline of 6.1 percentage points in the CET1 ratio of the participating banks.

 

No bank fell below the threshold ratio of 8% CET1 after the AQR, while the effect of the combined AQR and stress test resulted in five banks falling below the threshold ratio of 5.5% CET1 in the adverse scenario. The aggregate capital shortfall identified across these five banks is €1.74 billion. This will partly be covered by recent capital increases undertaken since January 2015 and other eligible measures.

 

As in the 2014 exercise, the banks will be required to address remaining shortfalls in a timely manner by issuing capital instruments or undertaking other eligible measures to restore their capital positions to the required levels. This implies that shortfalls arising from the adverse scenario of the stress test will be expected to be covered within nine months after the publication of the comprehensive assessment results.

 

The five banks facing shortfalls will have to submit capital plans detailing the relevant measures within two weeks after the publication date. The implementation and monitoring of the relevant actions will be aligned with the annual Supervisory Review and Evaluation Process (SREP) carried out by the Joint Supervisory Teams (JSTs) in charge of supervising the banks concerned.

 

Remediation actions will not be limited to closing capital gaps. Banks must also take measures to address qualitative findings of the AQR, such as weaknesses in their systems and processes.

 

Press release

Results