ECB Publishes Results of Comprehensive Assessment for Nordea Bank
ECB published the results of a comprehensive assessment for Nordea Bank Abp (Nordea), following the relocation of its headquarters from Sweden to Finland in 2018. The assessment shows that Nordea does not face any capital shortfalls, as it did not fall below the relevant thresholds used in the asset quality review (AQR) and the stress test. However, the bank will be expected to follow up on the outcome of the exercise and undertake actions to address findings of the AQR such as policy and process deficiencies and data system weaknesses.
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
Keywords: Europe, EU, Banking, Asset Quality Review, Stress Testing, IFRS 9, CET 1, Nordea Bank Abp, ECB
Featured Experts
Emil Lopez
Credit risk modeling advisor; IFRS 9 researcher; data quality and risk reporting manager
Masha Muzyka
CECL, IFRS 9, and IFRS 17 expert; credit risk and insurance risk specialist; strategic planning and credit analytics solutions consultant
Nihil Patel
Data scientist; SaaS product designer; credit portfolio analyst and product strategist; portfolio modeler; correlation researcher
Related Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.