EU Bank Stress Test Revisited: A Call for Enhanced Transparency, Consistency and Methodology
Miguel Sanchez de Pedro
OxValue Advisers S.L.
September 13, 2010
The disclosure on July 23rd, 2010 of the second (the first presented to the September 2009 Financial Stability Table of the Economic and Finance Committee of the EU Council) EU wide bank stress test undertaken by the Committee of European Banking Supervisors (CEBS) sheds more shadows than light about the ability of EU banks to meet the 6% threshold Tier 1 capital ratio in the event of occurrence of the conditions depicted under the adverse scenario including sovereign shocks.
The stress test was applied to a sample of 91 banks with total assets of 28,032bn € as of end of 2009, represent approximately 65% of the EU banking sector as a whole and at least 50% of the respective national banking sector. The exercise focuses on capital adequacy by assessing credit and market risks; liquidity risks were not directly analysed.
The release of individual banks’ stress test output data, fails to explain about the methodology and valuation criteria applied in arriving at the data published in the template for bank specific publication of the stress test output.
National supervisors have taken a diverse approach both, in quantitative and qualitative terms, with regard to the information provided. Spain tested the largest number of banks as well as the largest size in relative terms, of national banking assets and disclosed - well beyond the minimum agreed by CEBS - more detailed information, than any other EU supervisory authority.
Number of Pages in PDF File: 5
Keywords: stress test, EU banks, capital adequacy, tier 1
JEL Classification: E5, G21working papers series
Date posted: September 15, 2010
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo7 in 0.360 seconds