BBVA has demonstrated its solid resilience in the European Banking Authority’s (EBA) stress tests of European banks, published today. In the adverse scenario, the bank would attain a fully-loaded CET1 ratio of 8.2% in 2018.
The exercise uses data from each bank at the end of 2015 and analyzes two possible scenarios (a baseline and an adverse scenario) for three years (2016, 2017 and 2018), assuming a static balance. This allows for comparability among banks.
In terms of capital, in the adverse scenario BBVA would reach a fully-loaded CET1 ratio of 8.2% in 2018. According to the exercise likewise BBVA would have a phased-in CET1 ratio of 12% in December 2018 for the baseline scenario and 8.3% for the adverse scenario.
“The test demonstrates BBVA’s solid capital position even in extreme situations,” says BBVA Head of Global Supervisory Relations Eduardo Ávila.
The stress test offers uniform information regarding financial institutions’ ability to generate profit and capital. The results allow supervisors to calculate banks’ ability to withstand relevant shocks. This enables them to identify areas for improvement as well as preventative measures to mitigate the potential impact of these shocks.
“The exercise improves market discipline by publishing consistent and detailed information about each institution that shows how balance sheets would be affected in an adverse scenario,” says BBVA Chief Risk Officer Rafael Salinas.
Unlike previous tests, this time the EBA has not set a minimum capital requirement to pass the test. In other words, there will be no pass or fail grade. The stress test results will be incorporated into the SREP evaluation process and will also be taken into account in potential capital measures.
More information on the 2016 EU-wide stress test here.