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The Hungarian participant in the European banking stress test comfortably exceeded the level required by regulations


Budapest, 2 November 2018 – In the case of OTP Bank, the only Hungarian credit institution participating in the European Banking Authority’s stress test, on which data were published today, no supervisory intervention is necessary in the light of the results.

The European Banking Authority (EBA) released the 2018 stress test results today. The test is supposed to assess European banks’ resilience to shocks. The financial institutions participated in the exercise over a three-year horizon, assuming a hypothetical adverse macroeconomic scenario and using the common methodology provided by the EBA.

Consistent with the earlier EBA stress test in 2016, this year’s exercise does not contain a common pass/fail threshold, since it is designed to serve as an input to the 2018 Supervisory Review and Evaluation Process (SREP), mainly through determining the Pillar 2 capital requirements (related to supervisory review) or through various supervisory measures, if necessary. The stress test covered a total of 48 European banks (representing roughly 70 per cent of the EU’s banking sector in terms of total assets), 33 of which are based in countries regulated by the Single Supervisory Mechanism (SSM) operated with the participation of the European Central Bank, while another 15 are headquartered in Denmark, the United Kingdom, Poland, Hungary, Norway or Sweden.

From Hungary, only OTP Bank Nyrt. (OTP Bank) participated in the 2018 stress test exercise. This is because OTP Bank is the market leader in the Hungarian credit institution sector, with a market share of over 25 per cent based on its balance sheet total, and it is present in nine countries of the Central and Eastern European region through its subsidiaries.

Based on the capital position, the most important factor in the stress test, OTP Bank’s results were even better than two years ago, as it vastly exceeded the regulatory minimum requirements (including the SREP capital requirement and the combined capital buffer requirements). OTP Bank’s Common Equity Tier 1 capital ratio (CET1), adjusted due to the transition to the IFRS 9 standard compulsory at the European level from 2018 and not containing the transitional arrangements of the relevant European regulation, would change from 14.87 per cent in 2017 to 12.40 per cent (or from 15.40 per cent to 13.03 per cent with the transitional arrangements) at the end of the three-year shock scenario. In the case of the CET1 ratio, the difference between the baseline and the stress scenario is close to 3.5 percentage points at the end of the three-year horizon, which confirms the stress test’s severity and credibility. The quality assurance of the published stress test data was the task of competent supervisory authorities, and in Hungary the Magyar Nemzeti Bank (MNB) was responsible for this.

For more information on the 2018 EBA stress test’s scenarios, assumptions, the methodology and the detailed results as well as the relevant press release, please visit the EBA website.

Magyar Nemzeti Bank

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