The European Banking Authority (EBA) published on 2 November 2018, at 19.00 Finnish time, the results of its EU-wide stress test exercise, which assessed the resilience of significant banks to possible changes in the operating environment. The stress tests measured the impact of an unlikely but plausible strong weakening in the operating environment on the profits and capital ratios of large European banks. In the stress tests, the banks assessed the impact on their profit and capital position in accordance with common guidelines and methodology, and based on figures at the end of 2017.
Of Finnish banks subject to ECB supervision, OP Financial Group participated in the EBA stress test. The results of the stress test show that in the adverse scenario, OP Financial Group’s CET1 ratio falls to 15.3%, but it does not fall below the capital requirement. Nordea, which has moved its headquarters to Finland, participated in the EBA stress test as a Swedish banking group.
Supervisory authorities will apply the stress test results as an input to the supervisory review and evaluation process (SREP). The SREP process is designed to ensure that supervised entities have sufficient own funds to cover material risks.
Capital levels of smaller Finnish banks remained good
The Financial Supervisory Authority conducted the stress test as a national expansion of the EBA stress test and it covered the smaller eight banks and groups that are subject to its direct supervision. The stress test exercise was based on the guidelines and the two scenarios of EBA's EU-wide stress tests.
The results show that the total capital adequacy of the smaller Finnish banks remains good also in the adverse scenario, but the impact and application of methodologies varied significantly across banks. The banks’ total Common Equity Tier 1 (CET1) ratio falls in the adverse scenario by 1.9 percentage points to 15.2%, and in the baseline scenario, it rises by 0.7 percentage points.
For further information, please contact:
Jyri Helenius, Deputy Director General, tel. +358 9 183 5312.