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The 87 banks covered in the report include 33 euro area banks that were part of the EU-wide stress test coordinated by the European Banking Authority (EBA). The ECB conducted additional stress tests on 54 significant institutions which it directly supervises and which were not part of the EBA stress test. Both sets of results form the aggregate report released today. The reference date for the 2018 stress test was 31 December 2017.
The results show that the 87 banks directly supervised by the ECB have become more resilient to financial shocks over the past two years. Despite a more severe adverse scenario than in the 2016 stress test, the average Common Equity Tier 1 (CET1) capital ratio of all 87 banks after a three-year stress period was 10.1%, up from 8.8% two years ago. The CET1 ratio is a key measure of a bank’s financial soundness.
Looking at the 54 medium-sized banks tested solely by the ECB, the results show that they have become better capitalised, increasing their ability to absorb financial shocks. In addition to the EBA sample (33 banks), which covers around 70% of euro area banking assets, they represent a further 9% of banking assets in the euro area.
Thanks to the continuous build-up of capital in recent years, these 54 banks also entered the stress test with a stronger capital base, with an average CET1 ratio of 16.9% going into the test, up from 14.7% in 2016.
The 54 banks also exited the stress test with higher capital buffers than two years ago. Despite a more severe adverse scenario, the banks still had an average final CET1 of 11.8% at the end of the test, compared to 8.5% in 2016. The capital depletion of an aggregate 5.1 percentage points in the adverse scenario was also smaller than the 6.2 percentage points two years ago