EBA publishes results of the 2023 EU-wide stress test
De Volksbank was subject to the 2023 EU-wide stress test conducted by the European Banking Authority (EBA), in cooperation with the European Central Bank (ECB), national competent authorities and the European Systemic Risk Board (ESRB).
The stress test assessed the solvency of EU banks in an adverse macroeconomic scenario over a three-year horizon (2023-2025) and whether their capital levels are sufficient to ensure they can support the economy in periods of severe stress. The results provide input for the Supervisory Review and Evaluation Process (SREP) for the competent supervisory authorities. The stress test did not contain a pass or fail threshold.
The adverse stress test scenario was carried out applying a static balance sheet assumption as at December 2022, and therefore does not take into account a bank’s future growth or management actions. In addition, the bank’s net interest income was capped at the 2022 level.
The adverse scenario assumes a worsening of geopolitical tensions leading to a severe decline in GDP with persistent inflation and high interest rates. This scenario is designed to ensure a significant severity of various macroeconomic and financial shocks across all EU countries. For example, the assumption with respect to Dutch house prices was a cumulative 32% decrease up to 2025.
The starting point of the stress test for de Volksbank, was a year-end 2022 CET1 capital ratio of 20.26%. Under the baseline scenario and EBA’s methodological instructions, de Volksbank would have a CET1 capital ratio of 18.91% in 2025. Under the adverse scenario, our CET1 capital ratio would stand at 10.01% in 2025. Our current overall CET1 capital requirement stands at 10.69%, implying partial use of the capital buffers. These buffers aim to enable banks to absorb losses while maintaining the provision of key services to the real economy.
Detailed results of the EBA EU-wide stress test are available on the website of the EBA.