On the 26 October 2014 the European Central Bank (ECB) with the national supervisors published the results of a comprehensive assessment of bank balance sheets of the 130 largest banks in the Euro zone.The exercise included a detailed review of banks’ assets (Asset Quality Review – AQR) as well as a Stress Test carried out jointly with the European Banking Authority (EBA).
The assessment, conducted from November 2013 to October 2014, had 3 main objectives:
• Stabilisation, which involved identifying and implementing corrective actions as needed.
• Transparency, which makes it possible to improve the quality of the information available about the condition of the banks.
• Strengthening confidence, which assures all stakeholders that all of the banks in the eurozone have been examined with the same degree of rigor.
The ECB and the national central banks published the results of a comprehensive Asset Quality Review (AQR), designed to measure the exposure of European banks to a series of risks, together with the results of “stress tests”, which aimed to test the soundness of the banks’ balance sheets in the event of economic or financial shocks.
This is the first time that a review of asset quality has been conducted in parallel with stress tests, thus making possible a rigorous and more detailed review of the banks’ balance sheets.
The banks concerned were required to demonstrate a Common Equity Tier 1 capital ratio of 8% under the base scenario, and 5.5% under the stress test scenarios.
The 12 French banks passed these tests without incident, including the BNP Paribas Group, which demonstrated a solid capital position as well as the ability to withstand major stress scenarios.
The results of the comprehensive study conducted by the ECB and the European Banking Authority confirm the robustness of the BNP Paribas Group’s balance sheet, the quality of its assets and the rigor of its risk policy.
Note: the nature and the scope of the AQR were defined using a methodology that was primarily designed centrally by the Oliver Wyman consulting firm, as advisor to the ECB, while the methodology for the stress test was designed by the London-based European Banking Authority (EBA).