The stress test, which was conducted by the EBA in collaboration with the European Central Bank (ECB), the European Systemic Risk Board (ESRB) and the national central banks, has no minimum value that banks must meet in order to pass the test. However, the results are taken into account by the supervisors and recommendations can be made.
One of the things that was looked at is the so-called CET1 ratio, which reflects the size of a bank’s capital buffer. The fifty largest banks in the eurozone have an average ratio of 15 percent, well above the minimum requirement. In the worst-case scenario, this falls to an average of just above 10 percent, with which the banks still meet the requirements of supervisors, although 265 billion euros will disappear.
The large Dutch banks ING, Rabobank and ABN AMRO all met the requirements of the EBA and ECB. The Italian bank Monte dei Paschi di Siena saw its entire buffer disappear in the most negative scenario. That bank is already talking with UniCredit about a merger to strengthen the Italian banking sector.
The results of the stress test will, among other things, be taken into account when determining whether banks can again pay dividends and buy back shares. That was temporarily not allowed during the corona crisis, but that rule will disappear from September. Then it is examined on a case-by-case basis whether banks are allowed to reward their shareholders again.
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Most banks are in better shape than three years ago | Financial
Source link Most banks are in better shape than three years ago | Financial