At noon today, the European Central Bank (ECB) and the European Banking Authority (EBA) released the results of the Comprehensive Assessment. This was the most extensive assessment ever made on the resilience of the European banking system. It was carried out by ECB-selected independent international experts, and comprised an asset quality review (AQR) and stress tests. 130 European banks were involved in the assessment, which lasted from November 2013 to October 2014.
Nova KBM, as the second-largest systemically important bank in Slovenia, has actively participated in the execution of this Europe-wide Comprehensive Assessment and has consistently and accurately performed all its work in this regard. Notwithstanding the additional workload imposed on its employees involved in the process required to achieve the objectives of the stress test and AQR, Nova KBM supports the need to assess the financial health of systemically important European banks that will come under the direct supervision of the ECB on 4th November 2014. The aims of capital exercises are to obtain a more transparent picture of the conditions in the European banking sector and to help build confidence in it, while at the same time giving banks an opportunity to identify possible problems in advance and to solve them quickly through the timely implementation of appropriate measures.
While the stress tests have been carried out based on the consolidated data for the end of 2013, a year that was probably the most challenging one in decades for Nova KBM, the criteria used in the stress test that assessed the resilience of banks under the baseline and adverse scenarios in a three-year period were very stringent. The assumption of a static balance sheet was applied to the stress test carried out in Nova KBM. Before final publication, the results of the stress tests have been adjusted with the findings of the asset quality review (“join-up”).
The results published today on the Comprehensive Assessment have revealed that, as of 31st December 2013, Nova KBM´s Common Equity Tier 1 (CET1) ratio stood at 12.8% under the baseline scenario, which exceeded the minimum requirement (8%), while under the adverse scenario its CET1 was 4.4%, suggesting that Nova KBM failed to meet the minimum ratio requirement set for this scenario (5.5%). Nova KBM´s total capital shortfall, calculated in accordance with the stress test´s stringent criteria, amounts to € 31 million.
Acting with due care and diligence, Nova KBM has already taken into consideration the capital adjustment, which derives from the results of the Comprehensive Assessment, in the setting aside of additional provisioning expenses in 2014. It must be pointed out in this context that Nova KBM fully complies with the commitments set out in its restructuring programme, including the commitment to reduce its risk-weighted assets. In view of the published results of the Comprehensive Assessment, the above activities would contribute to a significant improvement in the stress test results already after first six months of 2014, helping Nova KBM to exceed the minimum CET1 ratio requirement of 5.5%.
Nova KBM´s profitable performance in 2014 demonstrates that its operations are on the right track. Following its recapitalisation last year, Nova KBM became one of the banks with the strongest capital adequacy in the Eurozone. While, in accordance with the applicable regulations, Nova KBM has already transferred an important share of its bad assets to BAMC, its competent departments continue to be very active in the management of risk assets. The restructuring of Nova KBM and the Nova KBM Group is going on, with its main objectives being as follows: to further improve the quality of the loan portfolio and operational processes; to introduce a slimmer organisational structure; to increase cost-efficiency; and to place an even greater focus on customers. In the pursuit of its objectives, Nova KBM favours the financing of companies with good business models and promising projects, at the same time prioritising prudent risk management over growth. Nova KBM remains a highly liquid and stable bank. Customer deposits placed with Nova KBM are in safe hands, and its operations will continue to run smoothly in the future.
The results of the Comprehensive Assessment are available at the following links:
- ECB,
- EBA in
