ECB Publishes Results of Comprehensive Assessment for Nordea Bank

The 2019 comprehensive assessment of Nordea was similar to the in-depth financial health check of 130 banks in the run-up to the launch of European banking supervision in 2014 and of additional 13 banks in 2015 and 2016. The AQR for Nordea followed the updated ECB AQR Methodology, which was published in June 2018, and incorporates the effect of the accounting standard IFRS 9. All banks that become or are likely to become subject to direct ECB supervision are required to undergo a comprehensive assessment, consisting of a stress test and an AQR. Nordea has been directly supervised by ECB since it was granted a new banking license in Finland in 2018. The AQR is a prudential rather than an accounting exercise and provides ECB with a point-in-time assessment of the carrying values of a bank’s assets on a particular date (June 30, 2018 in case of Nordea).

The AQR also determines whether there is a need to strengthen the capital base of a bank. The AQR was complemented by a stress test exercise, which looked at how capital positions of the bank would evolve under a baseline scenario and an adverse scenario over the next three years (2018-2021). The stress test was conducted using the same methodology as that applied in the 2018 EBA stress test. The threshold ratios applied for identifying capital shortfalls were maintained at the same levels as in previous exercises: a common equity tier 1 (CET1) ratio of 8% for the AQR and the stress test baseline scenario, along with a CET1 ratio of 5.5% for the stress test adverse scenario.

Related Links

• Press Release
• Results of Assessment (XLSX)

Keywords: Europe, EU, Banking, Asset Quality Review, Stress Testing, IFRS 9, CET 1, Nordea Bank Abp, ECB