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
Next ArticleIASB Issues Updates of Meetings for March 2019
The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.
The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.
The European Banking Authority (EBA) published the final report on the guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits and the time and measures needed for institutions to return to compliance.
The Prudential Regulation Authority (PRA) issued the policy statement PS20/21, which contains final rules for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies.
The European Banking Authority (EBA) revised the guidelines on stress tests to be conducted by the national deposit guarantee schemes under the Deposit Guarantee Schemes Directive (DGSD).
The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.
The Hong Kong Monetary Authority (HKMA) issued a circular, for all authorized institutions, to confirm its support of an information note that sets out various options available in the loan market for replacing USD LIBOR with the Secured Overnight Financing Rate (SOFR).
The Office of the Comptroller of the Currency (OCC) issued a new "Problem Bank Supervision" booklet of the Comptroller's Handbook. The booklet covers information on timely identification and rehabilitation of problem banks and their advanced supervision, enforcement, and resolution when conditions warrant.