Results of the 2014 comprehensive assessment
The 2014 comprehensive assessment was a financial health check of 130 banks in the euro area (including Lithuania), covering approximately 82% of total bank assets.
It was carried out by the ECB together with the national supervisors between November 2013 and October 2014 and was an important step in preparing the Single Supervisory Mechanism to become fully operational.
|No of banks covered||130 (including three Lithuanian banking groups)|
|Bank assets covered (%)||Approx. 82%|
|No of national supervisors involved||26|
|No of people involved||Approx. 6,000|
The comprehensive assessment concluded with an aggregate disclosure of the overall outcomes as well as bank-level data, together with recommendations for supervisory measures.
What happens next?
The shortfalls identified in the Asset Quality Review or under the baseline stress test scenario have to be covered by the end of April 2015; those identified under the adverse stress test scenario by the end of July 2015.
The results are taken into account in day-to-day supervision by the ECB from November onwards. In particular, results are factored into the ongoing assessment of banks' risks, their governance arrangements and their capital and liquidity situation as part of the Supervisory Review and Evaluation Process (SREP).
The comprehensive assessment comprised two main pillars:
- an asset quality review (AQR) – to enhance the transparency of bank exposures, including the adequacy of asset and collateral valuation and related provisions
- a stress test – to test the resilience of banks’ balance sheets, performed in close cooperation with the European Banking Authority (EBA)
The quality-assured stress test results were integrated with the AQR results in a process known as the “join-up”.
The join-up is what set the comprehensive assessment apart from any other previous European exercise. It connected and reinforced the point-in-time AQR and the forward-looking stress test, strengthening the overall exercise.
Full AQR results were incorporated into stress test results for all banks by adjusting the starting balance sheet positions.
The comprehensive assessment was based on a capital benchmark of 8% Common Equity Tier 1, drawing on the definition of the Capital Requirements Directive IV/Capital Requirements Regulation, including transitional arrangements, for both the AQR and the baseline stress test scenario.
The stress test used both a baseline and an adverse scenario for testing banks’ resilience to stress. In the baseline scenario, the EU economy develops in line with the European Commission’s projections up to 2016; in the adverse scenario, macroeconomic developments clearly deteriorate.
The ECB collaborated closely with the EBA on the stress test methodology, and with the European Systemic Risk Board, which drew up the adverse scenario. The baseline scenario was drawn up by the European Commission.
The comprehensive assessment was carried out by the ECB together with the national supervisors of the participating countries, and with the support of independent third parties.
The ECB was responsible for:
- managing the exercise
- planning the design and strategy
- monitoring execution in close cooperation with the national supervisors
- performing quality assurance on an ongoing basis
- collecting, consolidating and publishing the results
- finalising and disclosing the overall assessment
The national supervisors were responsible for the execution of the exercise in their respective countries, thereby making optimum use of local knowledge and expertise.
Quality assurance measures were put in place to ensure consistency across countries and banks.