EBA stress test confirms results expected for the two participating Austrian banks

The European Banking Authority (EBA) today published the results of its most recent EU-wide stress test exercise. The publication of stress test results is an important contribution toward raising transparency in the European banking sector. In the 2016 exercise, the most significant banks of the European Economic Area (EEA) operating internationally were subjected to severe shock simulations. The tested sample included 51 banks, among them two Austrian credit institutions: Erste Group Bank AG and Raiffeisen Zentralbank Österreich AG (RZB). The results for these two banks met supervisors’ expectations – not least because of their relatively low initial capital levels. At about -4 percentage points, the effect the adverse scenario had on their capital positions roughly corresponds to the average of all banks included in the stress test exercise. In other words, even in the adverse scenario, the two banks’ capital positions remain above the supervisory benchmark of 5.5 % defined for common equity tier 1 (CET1) in the course of the 2014 comprehensive assessment (Erste Group: 8.2 % CET1; RZB: 6.1 % CET1). The stress test exercise has demonstrated how important it has been over the past years to urge Austrian banks to considerably strengthen their capital bases. And since the cutoff date for the stress tests (December 31, 2015) even more measures to raise their capital levels have been taken, and further steps are currently being prepared.

The EBA’s stress test is no forecasting exercise; rather, it analyzes how banks’ capital positions may develop under different stress scenarios. The adverse scenario assumed the following shocks for the 2016 exercise: a slump in economic growth, negative exchange rate developments and highly pessimistic assumptions concerning economic growth in Central, Eastern and Southeastern Europe, which is particularly relevant for Austrian banks. The results of the stress test serve as a basis for the supervisory assessment of the capital positions of the examined banks.

As a third Austrian credit institution, Bank Austria was indirectly included in the stress testing via its Italian parent institution UniCredit.

The results for all banks included in the stress test exercise are published on the EBA’s Website.