The European Central Bank (ECB) has published the results of the stress-test that it has conducted over the past year in respect of the 130 largest banks in the euro area, considering their financial position as at the 31st December 2013.
The comprehensive assessment exercise represents a major milestone in the preparation for the Single Supervisory Mechanism (“SSM”) which will become fully operational in November 2014 and is intended to boost public confidence in the banking sector by identifying key risks and other issues that will help strategically important financial institutions repair their balance sheets and become more resilient and robust. According to Vítor Constâncio, Vice-President of the ECB, “This should facilitate more lending in Europe, which will help economic growth.”
Malta’s key banking institutions namely Bank of Valletta plc, HSBC Bank Malta plc, and Deutsche Bank (Malta) Ltd. were subject to the exercise, which consisted of two key components namely an asset quality review (AQR) and a stress test following a methodology designed and published by the EBA. The ECB has found that all three institutions satisfied the applicable criteria and no capital shortfalls were identified either in the baseline or the adverse scenarios.
These results confirm the soundness and resilience of these three Maltese banks, all of which have retained a CET1 capital ratio above the 8% minimum threshold after the AQR.
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