The European Banking Authority (EBA) today announces the results of this year’s EU-wide stress test, which also covers DnB NOR Bank. This is the first time a Norwegian bank has participated in an EU-wide stress test for banks.
“DnB NOR Bank has passed the stress test by an ample margin. Accordingly no steps need to be taken by the supervisory authorities or the bank as a result of the stress test,” says acting Deputy Director General, Finance and Insurance Supervision, Erik Lind Iversen.
Background and purpose
The stress test assesses the resilience of European banks to severe shocks and losses. It also seeks to improve transparency in the European banking sector, and is considered an important tool for supervisory authorities.
A total of 91 banks, representing some 65% of the European banking sector’s total assets, have participated in the stress test.
The stress test was carried out by the EBA in March–June 2011 in close cooperation with the European Central Bank, the European Systemic Risk Board, the European Commission and national supervisory authorities in the participating countries. Finanstilsynet is responsible for quality assurance of the reporting for the Norwegian bank, DnB NOR.
The test has been carried out on a static balance sheet as of 31 December 2010 over a two-year time horizon.
Design of the stress test
This year’s stress test is based on lessons learned from two earlier tests conducted by the EBA’s predecessor, CEBS. Its main concerns are credit risk and market risk.
This year’s test is somewhat more stringent than last year’s. Measured over the two-year period covered by the stress scenario, the EU countries’ GDP growth is about 4 percentage points lower than in the benchmark scenario. In last year’s stress test GDP growth was 3 percentage points lower. The EBA also assumes a steeper price fall in property markets in this year’s test, in particular for commercial property, along with higher funding costs.
The banks are assessed against a Core Tier 1 benchmark set at 5 per cent of risk weighted assets.
See the EBA’s website for the aggregate report, press release and results for all participating banks.