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.
Keywords: Europe, EU, Banking, Asset Quality Review, Stress Testing, IFRS 9, CET 1, Nordea Bank Abp, ECB
BIS published a paper that provides an overview on the use of big data and machine learning in the central bank community.
APRA finalized the reporting standard ARS 115.0 on capital adequacy with respect to the standardized measurement approach to operational risk for authorized deposit-taking institutions in Australia.
ECB published a guide that outlines the principles and methods for calculating the penalties for regulatory breaches of prudential requirements by banks.
MAS and The Association of Banks in Singapore (ABS) jointly issued a paper that sets out good practices for the management of operational and other risks stemming from new work arrangements adopted by financial institutions amid the COVID-19 pandemic.
ACPR announced that a new data collection application, called DLPP (Datalake for Prudential), for collecting banking and insurance prudential data will go into production on April 12, 2021.
BCB announced that the Financial Stability Committee decided to maintain the countercyclical capital buffer (CCyB) for Brazil at 0%, at least until the end of 2021.
EIOPA has launched a European-wide comparative study on non-life underwriting risk in internal models, also kicking-off of the data collection phase.
SRB published an overview of the resolution tools available in the Banking Union and their impact on a bank’s ability to maintain continuity of access to financial market infrastructure services in resolution.
EBA is consulting on the implementing technical standards for Pillar 3 disclosures on environmental, social, and governance (ESG) risks, as set out in requirements under Article 449a of the Capital Requirements Regulation (CRR).
ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting