The European Banking Authority (EBA) today announced the results of the EU-wide stress test of 51 European banks, including DNB Bank Group. The stress test scenarios cover the period 2016-2018.
Background and purpose
The EBA stress test is a common platform for stress testing of European banks. It provides detailed information on banks' resilience to economic shocks. The stress test is initiated and coordinated by the EBA and undertaken in cooperation with the competent authorities (including the Single Supervisory Mechanism (SSM) for the euro area banks), the European Central Bank (ECB), the European Systemic Risk Board (ESRB) and the European Commission (EC). The stress test results will be incorporated in the authorities' assessment of banks' capital needs in the 2016 SREP process. The 2016 stress test is not a "pass/fail" stress test.
Finanstilsynet informed of the EBA stress test scenarios in press release 06/2016.
The stress scenario shows loan impairment of NOK 24 billion (2016-2018) for DNB Bank Group. Net interest income and net gains on financial instruments are considerably reduced. The annual result falls to NOK 1.1 billion in 2018. DNB Bank Group's CET1 ratio is unaffected by the stress test.
"Finanstilsynet sees no need to take particular measures as a direct consequence of the EBA stress test," says Deputy Director General at Finanstilsynet, Emil Steffensen.
Norwegian banks' profitability and capital are assessed under more severe scenarios in Finanstilsynet's own stress tests. See Theme 1 (pages 55-61) in Risk Outlook 2016: The Financial Market in Norway. For Finanstilsynet's methodologies for assessing risk and capital needs, see circular 12/2016.