Featured Product

    BaFin and Bundesbank Publish Results of Stress Test for LSIs

    September 23, 2019

    BaFin and Deutsche Bundesbank published the results of the 2019 stress testing exercise for less significant institutions (LSI). The stress test was conducted on nearly 1,412 small and medium-size German credit institutions that are under direct national supervision, constitute approximately 89% of all credit institutions in Germany, and cover about 38% of the assets in the banking system. Bundesbank and BaFin will use the results of the stress test to determine the pillar 2 guidance.

    The supervisory authorities defined several stress scenarios for the institutions to use. The institutions simulated their earnings situation and resilience for the period between 2019 and 2021, in each case using a baseline scenario and a stress scenario. The stress scenario anticipated a severe slowdown in the economy, during which interest rate risks, credit risks, and market risks arose, among other things. New to the 2019 stress test was the modeling of the banks’ statements of profit or loss, based on a crisis scenario defined by the supervisors.

    The results show that the profitability of small and medium-size banks and savings banks in Germany is low. The prospect of a prolonged period of historically low interest rates makes it very likely that profitability will decrease further. On an average, the institutions anticipate an increase in the common equity tier 1 (CET 1) capital from 16.5% to 16.8% by 2023. However, a third of the institutions expect CET 1 capital to fall. This is based primarily on the significant increase in risk-weighted assets, which is due to growing business volume and higher risk exposure. The longer the low interest rate environment continues, the more difficult it is for the institutions to build up capital. Despite this, the institutions are still able to continue to build up surplus capital, just to a lesser extent. With regard to residential and commercial real estate, the survey highlighted the need for standardized data collection on real estate financing. Analyses of over 100 banks and savings banks regarding their credit underwriting standards, excluding commercial real estate mortgage lending, indicated that credit underwriting standards were being relaxed.

     

    Related Links

    Keywords: Europe, Germany, Banking, Less Significant Institutions, Pillar 2, Basel III, Stress Testing, BaFin, Bundesbank

    Featured Experts
    Related Articles
    News

    EU Agencies Update LCR Rule and Macro-Prudential Policy Recommendation

    The European Commission (EC) published the Delegated Regulation 2022/786 with regard to the liquidity coverage requirements for credit institutions under the Capital Requirements Regulation (CRR).

    May 23, 2022 WebPage Regulatory News
    News

    EBA Publishes Regulatory Standards to Identify Shadow Banking Entities

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying the criteria to identify shadow banking entities for the purposes of reporting large exposures.

    May 23, 2022 WebPage Regulatory News
    News

    EIOPA Examines Physical Climate Risk Exposure, SII Non-Compliance

    The European Insurance and Occupational Pensions Authority (EIOPA) published a report assessing insurers' exposure to physical climate change risks

    May 20, 2022 WebPage Regulatory News
    News

    NGFS Report Explores Quantification of Climate Risk Differentials

    The Network for Greening the Financial System (NGFS) published two reports to aid central banks and regulators in their oversight of the financial sector and in their central bank operations

    May 19, 2022 WebPage Regulatory News
    News

    EC Publishes Results on Review of Web Accessibility Directive

    The European Commission (EC) published the results of a public consultation, held in October 2021, on the review of the Web Accessibility Directive.

    May 19, 2022 WebPage Regulatory News
    News

    MAS Consults on Adjustment Spreads for Conversion of SOR Contracts

    The Monetary Authority of Singapore (MAS) and the SC-STS are jointly consulting, until June 10, 2022, on setting adjustment spreads for the conversion of legacy SOR contracts to SORA reference rate.

    May 18, 2022 WebPage Regulatory News
    News

    OSFI Discusses Benchmark Rate Transition, Sets Out Work Priorities

    The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.

    May 17, 2022 WebPage Regulatory News
    News

    EBA Proposes Standards to Support Secondary NPL Markets

    The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.

    May 17, 2022 WebPage Regulatory News
    News

    EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution

    The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).

    May 13, 2022 WebPage Regulatory News
    News

    EBA Issues Standards for Crowdfunding Service Providers Under ECSPR

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.

    May 13, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8206