ANNOUNCEMENT BY CENTRAL BANK OF CYPRUS
ON THE RESULTS OF THE 2011 EU-WIDE STRESS TESTING EXERCISE
Bank of Cyprus and Marfin Popular Bank were subject to the 2011 EU-wide stress test conducted by the European Banking Authority (EBA), in cooperation with the Central Bank of Cyprus, the European Central Bank (ECB), the European Commission (EC) and the European Systemic Risk Board (ESRB).
The Central Bank of Cyprus notes the announcements made today by the EBA on the EU-wide stress test and fully acknowledges the outcomes of this exercise.
The EU-wide stress test, carried out across 91 banks covering over 65% of the EU banking system total assets, seeks to assess the resilience of European banks to severe shocks and their specific solvency to hypothetical stress events under certain restrictive conditions. The exercise requires that the results and weaknesses identified are acted on to improve the resilience of the European financial system.
The assumptions and methodology were established to assess banks’ capital adequacy against a 5% Core Tier 1 capital benchmark and are intended to restore confidence in the resilience of the banks tested. The adverse stress test scenario was set by the ECB and covers a two-year time horizon (2011-2012). The stress test has been carried out using a static balance sheet assumption as at December 2010. The stress test does not take into account future business strategies and management actions and is not a forecast of the two banks’ results.
Both banks passed the stress test. The estimated consolidated Core Tier 1 capital ratio of Bank of Cyprus would change to 6,2% and for Marfin Popular Bank to 5,3% under the adverse scenario in 2012 compared to 8,1% and 7,3%[1] respectively as of end of 2010. Adding to the results for 2012 under the adverse scenario the additional mitigating measures as reported in the results endorsed by the EBA, the ratio of Bank of Cyprus increases to 9,5% and the ratio of Marfin Popular Bank increases to 9,2%. Details on these additional mitigating measures can be found in the two banks’ announcements.[2]
Further details on the results of the stress testing exercise as well as information on the exposures of the two banks, including their exposures to sovereigns, are provided in the attached tables. The two banks have also published details of the results of the stress test on their websites.
Notes to editors
The detailed results of the stress test under the baseline and adverse scenarios as well as information on Bank of Cyprus and Marfin Popular Bank credit exposures and exposures to central and local governments are provided in the accompanying disclosure tables based on the common format provided by the EBA.
The stress test was carried out based on the EBA common methodology and key common assumptions (e.g. constant balance sheet, uniform treatment of securitisation exposures) as published in the EBA Methodological note. Therefore, the information relative to the baseline scenarios is provided only for comparison purposes. Neither the baseline scenario nor the adverse scenario should in any way be construed as a bank's forecast or directly compared to bank's other published information.
See more details on the scenarios, assumptions and methodology on the EBA website: http://www.eba.europa.eu/EU-wide-stress-testing/2011.aspx
15 July 2011
[1] Marfin Popular Bank’s core tier 1 ratio was 9,4% at the end of the first quarter of 2011 following the issue of common equity made in February 2011
Results of Bank of Cyprus Public Company Ltd
Results of Marfin Popular Bank Public Co Ltd
In order to view the announcement in the Cyprus Ministry of Finance website follow the link below
http://www.mof.gov.cy/mof/mof.nsf/DMLindex_en/DMLindex_en?OpenDocument