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European Stress tests 2010 1. In December 2009, the Ecofin Council gave the Committee of European Banking Supervisors (CEBS) a mandate to coordinate stress tests in 2010, as it had done in 2009, in cooperation with the European Central Bank (ECB); the objective of the exercise was to test the resilience of the European banking system. This extensive stress test exercise was intended to make it possible to assess whether the European banking sector is sufficiently robust to withstand potential shocks. In June 2010, the European Council decided to publish the results of these stress tests, in view of strengthening confidence in the European banking sector. 2. The stress tests were conducted on a bank-by-bank basis using a uniform methodology and based on macro-economic scenarios – namely for a moderate scenario and for a severe recession – for 2010 and 2011. Internal risk parameters derived from these macro-economic scenarios were applied to the portfolios of the banks involved. This methodology and these scenarios were designed by CEBS in close cooperation with the ECB. In Belgium, the stress test exercise was coordinated by the CBFA and the National Bank of Belgium (NBB). The macro-economic scenarios include a set of key macro-economic variables (e.g. the evolution of GDP, of unemployment and of the consumer price index), differentiated for EU Member States, the rest of the EEA countries and the US. The exercise also envisages adverse conditions in financial markets and a shock on interest rates to capture an increase in risk premia linked to a deterioration in the EU government bond markets. Annex 1 contains the macro-economic scenarios used for Belgium. 3. In Belgium, these stress tests were conducted for Dexia and KBC Bank. In each EU Member State, the sample was built by including banks, in descending order of size, so as to cover at least 50% of the national banking sector, as expressed in terms of total assets. For the EU banking sector as a whole, the 91 banks represent 65% of the EU banking sector. Banking groups have been tested on a consolidated level. This means that subsidiaries and branches of an EU cross-border banking group have been included in the exercise as a part of the test of the group as a whole. 4. The above-mentioned macro-economic scenarios and parameters were applied by the banks following the above-mentioned methodology, in consultation with and under the supervision of the CBFA and the NBB. The CBFA, as prudential supervisor, endorses the stress test results as contained in Annexes 2 - 3. As things stand today and assuming that the banks will continue to implement the measures previously announced within the framework of the European Commission decisions relating to the state aid received, the CBFA considers that no additional measures are necessary in respect of Dexia or KBC Bank. Finally, Dexia and KBC Bank have, as agreed at European level with a view to full transparency, published their exposures to central and equivalent authorities within the European Union. These figures are found in Annexes 4 - 5. 5. On the website of CEBS there is a summary report of the results of the European-wide stress test exercise, including information on the methodology used as well as a summary of the results on a bank-by-bank basis. 6. Given that the stress test was carried out under a number of key common and necessarily simplifying assumptions (e.g. constant balance sheet), the information on benchmark scenarios is provided only for comparison purposes and should in no way be construed as a forecast. The results of the scenarios should not be considered as representative of the current situation or of possible present capital needs. A stress testing exercise does not provide forecasts of expected outcomes since the scenarios are designed as "what-if" scenarios including plausible but, in some cases, extreme assumptions, which are therefore not very likely to materialise. Different stresses may produce different outcomes depending on the circumstances of each institution. Annexes: |
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