RCB Bank com­pletes ECB stress test with CET1 at 16.6%

Financial Mirror (Cyprus) - - FRONT PAGE -

RCB Bank Ltd is an­nounce that it has suc­cess­fully com­pleted the stress test car­ried out di­rectly by the Euro­pean Cen­tral Bank, which was sub­ject to the Euro­pean Bank­ing Author­ity (EBA) method­ol­ogy.

The stress test re­sults show that the bank’s Com­mon Eq­uity Tier 1 ra­tio (CET1) is 16.58% un­der the ad­verse sce­nario as at 31 De­cem­ber 2018, well above the reg­u­la­tory min­ima, in­clud­ing the fully phased in buf­fers ap­pli­ca­ble to the bank.

RCB Bank Ltd has been su­per­vised di­rectly by the ECB in co­or­di­na­tion with the Cen­tral Bank of Cyprus un­der the Sin­gle Su­per­vi­sory Mech­a­nism since Novem­ber 2014. It was not on the list of 51 EU banks for which the EBA con­ducted the stress tests. In­stead, it be­longs to the list of the in­sti­tu­tions for which the ECB per­formed the stress tests as part of the an­nual Su­per­vi­sory Re­view and Eval­u­a­tion Process (SREP).

Of the 51 banks sub­ject to the EBA-led stress test 37 are di­rectly su­per­vised by ECB Bank­ing Su­per­vi­sion, cov­er­ing 70% of bank­ing as­sets in the euro area.

Separately, the ECB con­ducted in par­al­lel a stress test of an ad­di­tional 56 banks un­der its di­rect su­per­vi­sion, us­ing the same method­ol­ogy. This is an in­ter­nal su­per­vi­sory ex­er­cise con­ducted by the ECB and the re­sults are not pub­lished by the ECB, but by the in­di­vid­ual banks as there were no banks “fail­ing” or “pass­ing”. The Pil­lar 2 cap­i­tal can­not be mech­a­nis­ti­cally com­puted from the stress test re­sults as these are one, but not the only fac­tor taken into ac­count. The Pil­lar 2 cap­i­tal will be de­ter­mined in the SREP de­ci­sions later this year.

Some mem­ber states (Cyprus, Es­to­nia, Fin­land, Italy, Latvia, Lithua­nia, Lux­em­bourg and Slo­vakia) de­cided to im­pose the full cap­i­tal con­ser­va­tion buf­fer (CCB) on their banks with­out any phase-in as of 1 Jan­uary 2016. Other mem­ber states opted for a four-year phase-in. The CCB is part of the Basel III cap­i­tal rules and is de­signed to en­sure that banks build up cap­i­tal buf­fers which can be drawn down as losses are in­curred. The CCB is to reach 2.5% of the risk-weighted as­sets as of 1 Jan­uary 2019 at the lat­est.

In 2014, 130 banks took part in the com­pre­hen­sive as­sess­ment, which con­sisted of an as­set qual­ity re­view and a stress test. The par­tic­i­pat­ing Cypriot banks were Bank of Cyprus, Hel­lenic Bank, Co­op­er­a­tive Cen­tral Bank and RCB Bank.

In prepa­ra­tion for the ECB’s takeover of its su­per­vi­sory re­spon­si­bil­i­ties, the ex­er­cise aimed to iden­tify pos­si­ble cap­i­tal short­falls and as­cer­tain if any banks re­quired im­me­di­ate re­cap­i­tal­i­sa­tion mea­sures. As euro area banks have since moved to more of a steady state and have be­come bet­ter cap­i­talised over­all, the aim of the 2016 ex­er­cise is rather to as­sess re­main­ing vul­ner­a­bil­i­ties and un­der­stand the im­pact of hy­po­thet­i­cal ad­verse mar­ket dy­nam­ics on banks. The stress test as part of the 2014 com­pre­hen­sive as­sess­ment and the 2016 stress test are hence quite dif­fer­ent in na­ture.

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