Press release 23 July 2010 – 11/2010   

EU stress testing exercise confirms good health of the Finnish banking sector 

Of the Finnish banks, the OP Pohjola group was included in the stress test exercise for the banking sector of the European Union conducted in June–July 2010. Additionally, Nordea Bank Finland of the Nordea Bank group and Sampo Bank of the Danske Bank group were included in the exercise as part of their parent groups.

The results of the stress test indicate that the capital adequacy of the OP Pohjola group is highly resilient to the adverse test scenario employed. Under the assumed adverse scenario, the Tier 1 capital ratio of the group would decline to 12.3% by the end of 2011, as compared with the 6% minimum target ratio of the testing exercise and the statutory minimum ratio of 4%. This estimate also accounts for the risks related to government bonds, which were tested separately. In the FIN-FSA's assessment, the group's capital adequacy and risk bearing capacity is strong.

In the EU stress test exercise, the Nordea and Danske Bank groups were assessed on an aggregated basis and their capital adequacy also proved to be strong according to the test. The stress tests arrived at a Tier 1 capital ratio of 10.1% for Nordea and a ratio of 10.0% for Danske Bank. – The EU stress test exercise confirms the findings of the FIN-FSA's previous analyses of the Finnish banking sector's strong resilience to risks in the operating environment, says Jukka Vesala, Deputy Director General.

According to FIN-FSA, the results of the stress test do not warrant any special measures for ensuring the stability of the banking sector in Finland.

Close coordination of the stress testing exercise at EU level

The Committee of European Banking Supervisors (CEBS), in cooperation with the European Central Bank, was responsible for coordination and harmonisation of the exercise. FIN-FSA and Bank of Finland were actively involved in the preparations for the test in various European fora. The same key assumptions and, in as far as possible, uniform methodology were used for the stress tests across EU countries. The stress test was to cover the largest banks of each country.

FIN-FSA prepared the calculations together with OP-Pohjola, making use of information obtained during ongoing supervision. The calculations have been verified and approved by FIN-FSA.

The adverse scenario is described in the enclosed report. The scenario tested the resilience of banks' capital adequacy to changes in the operating environment that are more severe than expected but still plausible. Additionally, the impairment risks of government bonds held in the bank trading book were analysed against a scenario of declining sovereign credit ratings in Europe. The effects of the adverse scenario were also analysed against a more favourable benchmark scenario. The scenarios should not be taken as economic forecasts of the authorities.

For more information, please contact

Jukka Vesala, Deputy Director General, tel +358 10 831 5374 (23 July from 19.15 and 24 July, 8.30–11.00).

Requests for contact may also be made with Suvi Lavikainen, Communications Officer, tel. +358 10 831 5234 or +358 50 385 5154.

Appendix

The stress test methodology and the results for the OP-Pohjola group are discussed in the report "OP-Pohjola group's capital adequacy proven resilient in the European stress test exercise" .