2016 Stress test results

The 2016 EU-wide stress test aims to provide to supervisors, banks and other market agents a common analytical framework to consistently compare and assess the resilience of large EU banks and the EU banking system to adverse economic shocks.

In particular, this exercise is designed to guide the supervisory review and evaluation process (SREP) that will be carried out by the competent authorities (CAs) in 2016. The disclosure of granular information at an individual level enables the adoption of an adequate market discipline and allows competent authorities to apply a common framework within their assessments.

• In this context, the EBA has published the aggregated and entity level stress test for 2016 to facilitate the assessment of entities' resilience facing market stress situation by supervisors. In particular, this document provides the main results of the 2016 stress test regarding the impact on: capital (CET1 phase-in and fully loaded); RWA for credit, market and operational risk; provisions and coverage ratio; P&L (interest margins, commissions and net benefit); and leverage ratio.

• These results reflect a sound performance of the banking sector across the EU due to the increase of capital ratios, although the individual results of the entities vary significantly.

This document prepared by the R&D area of Management Solutions analyses the main 2016 stress test results focusing on the aggregated results across the EU, as well as on the results of those countries with the highest concentration of asset’s volumes within the banking system.

Executive summary

The phase-in CET 1 ratio fell from 13.2% in 2015 to 9.4% in the adverse scenario in 2018, due to a capital reduction of €269 bn as well as an increase by 10% of RWA (the credit risk RWA are the ones with the highest impact). Moreover, the level of provisions within the EU increases by 191% between 2015 and 2018 (adverse scenario); meanwhile, the coverage ratio decreased between 2015 and 2018 within the two scenarios considered. Finally, the net benefits are affected significantly due to the credit risk losses of the adverse scenario, which are caused by counterparties in Italy, UK, Spain and France.

Scope of application

51 EU banks have participated in 2016, covering approximately 70% of the EU banking system’s assets, in terms of consolidated assets.

Main content:

• Detail of results, in terms of capital, RWA, provisions and coverage ratio, leverage ratio and P&L.

Download the technical note by clicking here.