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DBRS: Positive stress tests of European banks

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Small violations in TSCR and leverage ratio and relatively simple to fix

DBRS: Θετικα τα stress test των ευρωπαi&kappa ;oν τραπεζoν

The total capital “cushion” above the minimum regulatory requirements was lower compared to the 2021 stress tests.

The DBRS rating agency characterizes the results of the stress tests carried out by the European Banking Authority on systemic European banks as positive. “Despite the severity of some of the adverse scenario assumptions, EU banks showed lower capital depletion in the 2023 stress test than in previous exercises, which we attribute largely to a stronger and healthier starting point for profitability and the quality of banks' assets,” the Canadian house emphasizes.

It reports, however, that despite the lower capital depletion in the 2023 stress tests, the total capital “cushion” above the minimum requirements of the regulatory authorities was lower compared to the 2021 stress tests.

However, it notes that this was a result of the higher minimum requirements set by the authorities in 2023 compared to 2021.

DBRS reports that the results showed that in the adverse scenario that 2 banks out of 70 narrowly failed to meet the minimum TSCR Tier 1 ratio with a maximum capital shortfall of only 17 basis points, while 3 banks breached the minimum leverage limit with a maximum shortfall of 12 basis points.

“We believe that the results are positive, as violations in TSCR ratio and leverage ratio are very small and will be relatively simple to restore,” notes Pablo Manzano, vice president, Global FIG at DBRS Morningstar.

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Source: www.kathimerini.com.cy

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