Dutch banks achieve good score in European stress test

The European banking sector achieved a higher score than three years ago in the 2021 EU stress test by the European Banking Authority (EBA) , despite the coronavirus crisis.

The major Dutch banks, ABN Amro, ING and Rabobank all met the demands of the authorities, as did the Nederlandse Waterschapsbank (NWB), the BNG Bank and the Volksbank. The buffers of the BNG Bank and the NWB were several times higher than the minimum requirement.

The CET1-ratio which reflects a bank’s capital buffer is one of the criteria that is taken into account in the stress test. The 50 largest banks in the EU all have an average of about 15 percent above the demands of the EBA and the European Central Bank (ECB). Even if interest rates were to remain low for the upcoming three years and the economy would shrink, the capital buffer of the top banks would stay 10 percent above the minimum requirement. That would still mean the banks lose around 256 billion euros.

The results of the stress test help determine if banks can pay out dividends and buy shares. This was temporarily not possible during the coronavirus crisis. Starting in September, it will be evaluated case by case if banks will be allowed to pay out their shareholders.

The prospects looked worst for the Italian bank Monte Dei Paschi di Siena. In the worst-case scenario, the bank would completely lose all of its buffers. The Italian bank has been discussing a fusion with UniCredit to support the Italian banking sector.