ECB published the results of a comprehensive assessment of six Bulgarian banks, following a request by Bulgaria to establish close cooperation between ECB and the Bulgarian National Bank. The assessed banks are UniCredit Bulbank AD, DSK Bank EAD, United Bulgarian Bank AD, First Investment Bank AD, Central Cooperative Bank AD, and Investbank AD. The cut-off date for the exercise was December 31, 2018. Four of the assessed banks did not face capital shortfalls while First Investment Bank AD and Investbank AD fell below the 8% CET1 ratio threshold in the baseline scenario of the stress test.
A comprehensive assessment is required as part of the process of establishing close cooperation between ECB and the national competent authority of an EU member state whose currency is not euro. The exercise comprised an Asset Quality Review (AQR) and a stress test, both of which were based on the methodologies applied by ECB Banking Supervision in its regular comprehensive assessments of banks that have recently been classified as significant or could potentially become significant. The assessment identified the need to further strengthen capital positions of the banks using the same threshold ratios that had been applied in previous comprehensive assessments, including a common equity tier 1 (CET1) ratio of 8% for the AQR and the baseline scenario of the stress test, along with a CET1 ratio of 5.5% for the adverse scenario in the stress test.
Four of the six banks covered in the assessment—UniCredit Bulbank AD, DSK Bank EAD, United Bulgarian Bank AD, and Central Cooperative Bank AD—do not face any capital shortfalls, as they did not fall below the relevant thresholds used in AQR and the stress test. First Investment Bank AD, however, fell below the 8% CET1 ratio threshold for AQR and the stress test’s baseline scenario; the bank also fell below the 5.5% CET1 ratio threshold used in the adverse scenario of the stress test. Meanwhile, Investbank AD fell below both the 8% CET1 ratio threshold used in the stress test’s baseline scenario and the 5.5% CET1 ratio threshold used in the stress test’s adverse scenario.
AQR is a prudential exercise, rather than an accounting exercise, and provides ECB with a point-in-time assessment of the carrying values of banks’ assets on a particular date, which for this exercise is December 31, 2018. The AQR for the Bulgarian banks was performed on the basis of the updated AQR methodology, which the ECB published in June 2018 and takes account of the impact of accounting standard IFRS 9. The AQR was complemented by a stress test exercise, which looked at how the capital positions of banks would evolve under the hypothetical baseline and adverse scenarios over the next three years (2019-21). The stress test was conducted using the methodology applied in the 2018 stress test of EBA.
Keywords: Europe, EU, Bulgaria, Banking, Asset Quality Review, Stress Testing, CET 1, SSM, Banking Supervision, ECB
Previous ArticleMAS Revises Guidelines on Margin Requirements for OTC Derivatives
PRA published a statement that explains when to expect further information on the PRA approach to transposing the Capital Requirements Directive (CRD5), including its approach to revisions to the definition of capital for Pillar 2A.
SRB published the work program for 2021-2023, setting out a roadmap to further operationalize the Single Resolution Fund and to achieve robust resolvability of banks under its remit over the next three years.
EIOPA is consulting on the relevant ratios to be mandatorily disclosed by insurers and reinsurers falling within the scope of the Non-Financial Reporting Directive as well as on the methodologies to build these ratios.
US Agencies (FDIC, FED, and OCC) issued a joint statement encouraging banks to cease entering into new contracts that use USD LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021, to facilitate an orderly LIBOR transition.
The Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS, endorsed a coordinated approach to mitigate COVID-19 risks to the global banking system.
HM Treasury extended the consultation period on Phase II of the Future Regulatory Framework (FRF) Review, from January 19, 2021 to February 19, 2021.
ECB finalized guidance on the way it expects banks to prudently manage and transparently disclose climate and other environmental risks under the current prudential rules.
BCBS published a technical amendment to the capital treatment of securitizations of non-performing loans by banks.
PRA published the policy statement PS23/20 on the calculation of stressed value at risk (sVAR) and risks not in value at risk (RNIV) under the market risk framework.
BoE announced that the Data and Statistics Division is planning to move collection of statistical data to the BoE Electronic Data Submission (BEEDS) portal.