Information of Národná banka Slovenska to the CEBS 2010 EU wide stress testing exercise

23. 07. 2010 | Information for Public

The objective of the extended stress test exercise is to assess the overall resilience of the EU banking sector and the banks' ability to absorb further possible shocks on credit and market risks, including sovereign risks, and to assess the current dependence on public support measures.

According to the statement agreed by the Economic and Financial Committee (EFC) and the Committee of European Banking Supervisors (CEBS), the exercise has been conducted on a level of individual banking groups, which cover at least 50 % of total consolidated assets of each national banking sector. Banking groups have been tested on a consolidated level. This means that Slovak banks which are subsidiaries or branches of an EU cross-border banking group have been only included in the exercise as a part of the stress test of the group as a whole.

Slovak subsidiaries of foreign banking groups, which have been included in the stress testing exercise, represent 78 % of the consolidated assets of the Slovak banking sector (based on December 2009 data). Hence, the agreed coverage of 50 % of national banking sector has been reached by these subsidiaries only and no other Slovak bank has been added to the sample. Consequently, Národná banka Slovenska will not publish the stress testing results of these subsidiaries separately, nor the results for other Slovak banks, in accordance with the above-mentioned agreement of the EFC and the CEBS.

The stress testing exercise was based on commonly agreed macro-economic scenarios (baseline and adverse) for 2010 and 2011, developed in close cooperation with the ECB and the European Commission.

The macro-economic scenarios include a set of key macro-economic variables (e.g. the evolution of GDP, of unemployment and of the consumer price index), differentiated for EU Member States, the rest of the EEA countries and the US. The exercise also envisages adverse conditions in financial markets and a shock on interest rates to capture an increase in risk premia linked to a deterioration in the EU government bond markets.

On aggregate, the adverse scenario assumes a 3 percentage point deviation of GDP for the EU compared to the European Commission's forecasts over the two-year time horizon. The sovereign risk shock in the EU represents a deterioration of market conditions as compared to the situation observed in early May 2010.

At the same time we would like to emphasize that since 2005 Národná banka Slovenska regularly performs own stress testing of the Slovak banking sector with the objective to analyse resilience of individual banks and the banking sector as a whole. Results of stress scenarios are a part of Analysis of the Slovak Financial Sector. The next publication is expected in October 2010.

The CEBS summary report and the press release will be published at 18:00 CEST under the following URL: http://stress-test.c-ebs.org/firstresults.htm.
This page will be replaced by http://stress-test.c-ebs.org/results.htm at 18:30 CEST, where you will be able to find the results of individual banking groups.

National Bank of Slovakia
Press and Editorial Section
Imricha Karvasa 1, 813 25 Bratislava, Slovak Republic
Tel.: +421-2-5787 2142, +421-2-5865 2142, +421-2-5787 2169, +421-2-5865 2169
Internet: http://www.nbs.sk

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