Disclosure of the outcome of the EU-wide stress test for the Slovenian banks
The European Banking Authority (EBA) in cooperation with the national supervisors (in Slovenia Banka Slovenije), the European Central Bank (ECB), the European Commission (EC) and the European Systemic Risk Board (ESRB) conducted the EU-wide stress test with the aim to restore confidence in the sound EU banking sector. In Slovenia this year, two largest banks, Nova Ljubljanska banka d.d. and Nova Kreditna banka Maribor d.d., have participated in the EU-wide stress test.
The EU-wide stress test, conducted on 91 banks covering over 65% of the EU banking system total assets, seeks to assess the resilience of European banks to severe shocks and their specific solvency to hypothetical stress events under certain restrictive conditions.
The stress test was carried out based on the EBA common methodology and key common assumptions (e.g. static balance sheet, uniform treatment of securitisation exposures) published in the EBA Methodological note. The aim of the stress test was to access Core Tier 1 of individual banks. The benchmark is a 5% Core Tier 1. The adverse stress test scenario was set by the ECB and covers a two-year time horizon (2011 - 2012). The stress test has been carried out on a static balance sheet as at December 2010. The stress test does not take into account future business strategies and management actions and is not a forecast of banks' future profits.
Details on the results of stress test observed for:
Nova Ljubljanska banka
As a result of the assumed shock, the estimated consolidated Core Tier 1 ratio of Nova Ljubljanska banka would change to 5.3% under the adverse scenario in 2012. This result incorporates the effects of equity raising in the amount of EUR 250 million fully committed and paid in before 30 April 2011. If the raise in equity would have happened already in 2010, Core Tier 1 ratio would amount to 6.8%, but since it has not, it amounted to 5.2% at the end of 2010. The stress test does not take into account future mitigating actions (e.g. lowering of credit risks) planned by the bank.
Nova Kreditna banka Maribor
As a result of the assumed shock, the estimated consolidated Core Tier 1 ratio of Nova Kreditna banka Maribor would change to 8.0% under the adverse scenario in 2012. This result incorporates the effects of equity raising in the amount of EUR 104 million fully committed and paid in before 30 April 2011. If the raise in equity would have happened already in 2010, Core Tier 1 ratio would amount to 9.5%, but since it has not, it amounted to 7.4% at the end of 2010. The stress test does not take into account future mitigating actions planned by the bank.
The EU-wide stress test results and weaknesses identified are intended to improve the resilience of the financial system. The results indicate that Nova Kreditna banka Maribor is adequately capitalised with Core Tier 1 ratio, significantly above the 5% benchmark and will continue to ensure that appropriate capital level will be maintained. Nova Ljubljanska banka surpassed the capital benchmark, but its Core Tier 1 ratio is close to the 5% benchmark under the adverse scenario. Consequently Nova Ljubljanska banka will be subject to reinforced prudential scrutiny of Banka Slovenije with the purpose to ensure a higher capital ratio as soon as possible. In order to achieve a higher capital ratio, private-sector solutions will be preferred. The use of public funds will be available only as a last resort in case private funds are not sufficient and subject to strict conditionality and the state aid rules.
The detailed results of the stress test under the baseline and adverse scenario as well as information on banks credit exposures and exposures to central and local governments are provided in the accompanying disclosure templates based on the common format provided by the EBA on the webpage Results of EU wide stress testing exercise.
The information relative to the baseline scenarios is provided only for comparison purposes. Neither the baseline scenario nor the adverse scenario should in any way be construed as a bank's forecast or directly compared to bank's other published information.
See more details on the scenarios, assumptions and methodology on the EBA website: http://www.eba.europa.eu/EU-wide-stress-testing/2011.aspx.