Hellenic Bank, Bank of Cyprus, RCB perform well on ECB stress tests

Hellenic Bank, RCB Bank and the Bank of Cyprus emerged with good performance on the European Central Bank’s 2021 stress tests, according to the statistics released by the central bank on Friday.

“Given that the methodology applied includes a static balance sheet assumption, with floors on impairment coverage rates and an additional constraint of removing any securitisation benefit obtained from the Asset Protection Scheme (APS), Hellenic Bank is comfortable in its resilience to withstand an adverse shock under a real life scenario. This resilience is fuelled by the Bank’s strong capital and liquidity adequacy positions and is demonstrated through the robust risk profile which the Bank has and continues to exhibit during the Covid-19 pandemic,” Hellenic Bank said in a statement.

Sources close to Bank of Cyprus pointed out that the stress test did not result in any actions regarding the bank, and did not raise any alarms. It is notworthy, sources said, that the exercise relates to the end of 2020. Since that time, post-moratorium lending has outperformed assumptions and the bank has disposed of a large part of its non-performing loans in the Helix operation — this too is capital positive.

The outcome for RCB Bank was positive after the completion of the ECB 2021 stress tests, the bank said in a statement released on Monday.

The 2021 stress test results showed that RCB Bank’s Common Equity Tier 1 ratio (CET1) in the adverse scenario ranges between 11 and 14 per cent, the highest in the Cyprus banking sector.

Commenting on the completion of the tests, RCB Bank’s CEO Dr. Kirill Zimarin stated: “We are indeed satisfied with the results of the stress tests carried out by the EBA and the ECB. This positive outcome demonstrates that RCB Bank is both stable and strong and can therefore continue to be a reliable partner for its clients. The availability of significant capital reserves enables the Bank to continue the implementation of its plans on further expanding its operations in Cyprus and thus steadily supporting Cyprus’ businesses and in turn the recovery and growth of the country’s economy.”

The performance of both banks is in line with the overall performance of European banks, according to the ECB, which were found to be resilient on average.

“Since the previous EBA EU-wide stress test in 2018, banks have continued building up their capital base, and at the beginning of the exercise (i.e. end-2020), had a Common Equity Tier 1 ratio — which compares a bank’s capital against its risk-weighted assets — of 15 per cent on a fully loaded basis (15.3 per cent on a transitional basis), the highest since the EBA has been performing stress tests. This was achieved despite an unprecedented decline of the EU’s GDP and the first effects of the Covid-19 pandemic in 2020.”

The aim of the EU-wide stress test is to assess the resilience of EU banks to a common set of adverse economic developments in order to identify potential risks, inform supervisory decisions and increase market discipline, the ECB said in a statement released on Friday.

In 2021, the stress tests were made more challenging in an effort to mirror conditions experienced since the pandemic, according to the statement.

“This exercise allows to assess, in a consistent way, the resilience of EU banks over a three-year horizon under both a baseline and an adverse scenario, which is characterised by severe shocks taking into account the impact of the pandemic,” the statement said.