KBC and Belfius pass the test without a hitch, but other institutions will suffer in the worst case scenario.
The exercise was not easy. For the fifth sector stress test, theEuropean Banking Authority and the European Central Bank They warned that they would apply strict standards. The test was initially scheduled for 2020, and the test was delayed by one year to take into account the state of the pandemic.
Thus, the worst-case scenario, extended over three years, states that a deterioration of capital Of the main European banking institutions amounted to 265 billion euros. As a result of the ongoing pandemic accompanied by an environment of “lower longer” interest rates, economic stagnation and rising unemployment with 2020 marked by an already deteriorating economic environment as a starting point.
At the time of preparing the balance sheet, European financial authorities are breathing a sigh of relief. Fifty banks included in the test, Which accounts for about 70% of banking assets in the Eurozone, works relatively well from a general point of view.
Flexibility of Belgian banks
Thus the capital ratios will decrease from 15% to about 10%. For experts, this would be an acceptable level after three years of hardship. So ECB Vice President Luis de Guindos believes that banks are showing themselves as “strong” and “generally passing the test well”.
Most potential losses are related to credit defaults. In general, institutions with little international diversity and low interest income are the hardest hit. Italian Monte de Paschi, the world’s oldest still operating bank, will be the one that will suffer the most, with its money evaporating in the worst case scenario. German Bank And Societe Generale For their part, their performance is below average for retailers.
In Belgium only KBC And Belvius Influenced by the exercise of assets BNP Paribas Fortis And’ING Belgium They are taken into account in the balance sheet of the respective parent companies. The two Belgian banks passed the test with flying colors. In the worst case scenario, the solvency ratios drop from 17.58% to 14.07% and from 16.36% to 13.66%, respectively. The ING group will see its index drop from 15.41% to 10.99%, while BNP Paribas will suffer the most, with CET1 dropping from 12.61% to 8.21%.
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