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Ministry of Economy and FinanceECB comprehensive assessment and EU-wide Stress Test 2014
Elements for Communication on the Results and Remedial Measures
Final version 23 October 2014

Press release N° 244 of 10/26/2014

On the overall results

1.     The results of the ECB's comprehensive assessment and the 2014 EU-wide stress test have just been published. The EU-wide stress test has been conducted on a sample of EU banks at the consolidated level and has assessed their resilience under a hypothetical baseline and a hypothetical adverse scenario over a period of three years (2014-2016).

2.     For the euro area, as part of the Comprehensive Assessment, the stress test has been conducted by the ECB together with the national supervisors of the participating Member States (euro area and Lithuania) and in close cooperation with the European Banking Authority on the basis of a uniform methodology. The ECB's Comprehensive Assessment is composed of an extensive Asset Quality Review (AQR) and stress test for the banks of participating Member States. The AQR has reviewed bank exposures, including the adequacy of asset and collateral valuation and related provisions. 130 banks in total took part, as the ECB Comprehensive Assessment also considers subsidiaries of non-euro area banks in its sample.

3.     The Minister for Economy and Finance takes note of the results and welcomes the enhanced transparency and comparability in their publication, which together with the thoroughness of the exercise, are unprecedented. This enhanced transparency should reassure markets and all other stakeholders about the quality of banks’ balance sheets and the adequacy of capital levels.

4.     The results confirm the increased resilience of the EU banking sector, as reflected by both the average starting CET1 ratio and the final average CET1 ratio after the stress test, as well as by the additional efforts made by the banks since the cut-off date of 31 December 2013.

On the country specific outcome

1.     In Italy 15 banks (Banco Popolare, Banca Popolare dell’Emilia Romagna, Banca Popolare di Milano, Banca Popolare di Sondrio, Banca Popolare di Vicenza, Carige, Credito Emiliano, Credito Valetellinese, Iccrea, IntesaSanpaolo, Mediobanca, Monte dei Paschi di Siena, Unione di Banche Italiane, UniCredit, Veneto Banca) have participated in the exercise. Most of these banks have reinforced their capital from private sources to an amount of around 11 bn euro since 31 December 2013; other mitigating actions have been put in place for more than 4 bn.
The results indicate that for 9 banks the CET1 capital ratio fell below the 5.5 % threshold under the adverse scenario (8 of which also below the 8 % threshold under the AQR/baseline scenario). Banks not meeting the threshold have already raised more than 8 bn euro of capital since 31 December 2013; considering these capital increases no banks have shortfall with reference to the AQR, while the number of banks falling below the threshold of the stress test adverse scenario drops to 4. Considering the other mitigating actions already taken during the 2014, the number of banks with a remaining capital shortfall drops to 2 (namely, Carige and Monte dei Paschi di Siena).

Addressing capital shortfalls

2.     The stress test informs supervisory reviews of all banks and the results can lead to a range of supervisory actions to strengthen their resilience.

3.     In those cases in which a bank’s capital ratio falls short of the relevant thresholds, after consideration of the measures taken to increase capital, remedial actions will be taken. Within two weeks after the publication of the results, capital plans will need to be submitted to the SSM detailing how the shortfalls will be covered. Shortfalls shall be covered within six months for those identified in the AQR or the baseline stress test scenario, and within nine months for those identified in the adverse stress test scenario, starting from the release of the results on 26 October 2014.

4.     In line with the November 2013 Ecofin statement[1], capital shortfalls should in a first instance be covered by private sources. If this is revealed not to be sufficient or in the absence of access to sources of market financing, appropriate arrangements for recapitalising banks will be mobilised, if needed, including resolution mechanisms and/or through the provision of public funds (backstops) where appropriate.

5.     As set out in the July 2014 terms of reference on the "Applicable rules on addressing capital shortfalls and burden sharing in the context of the AQR and Stress test"[2] any public capital injection will be subject to the State aid rules[3] . These rules ensure that the recourse to public backstops is significantly reduced through appropriate burden sharing arrangements.

6.     To the end of enabling the potential adoption of the measures indicated in the November 2013 Ecofin statement, in line with the July 2014 terms of reference, the Italian Government is committed to implement the 2014/59/EU directive, establishing a framework for the recovery and resolution of credit institutions and investment firms, within the deadline that is set to cover the capital shortfalls.

7.     The Minister for Economy and Finance underlines that the Italian banks have prepared for the Comprehensive Assessment, timely increasing their capital ratios, through operations that were welcome by markets, thus acknowledging the solidity of the Italian banking system in advance of the publication of the results of the Comprehensive Assessment. The Minister is confident that the residual shortfalls will be covered through further market transactions and that the high transparency guaranteed by the Comprehensive Assessment will allow to easily complete such transactions. The Minister, finally, is committed to safeguarding financial stability and to contribute to further enhancing the resilience of the banking sector as part of a comprehensive EU-wide strategy for growth.

[1]       http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/139613.pdf
[2]      Agreed between the Representatives of the Governments of the Member States, meeting in the margin of the Ecofin Council on 8 July 2014.
[3]       Banking Communication 2013/C 216/01.
Rome 10/26/2014
IT

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