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OTP Bank passes ECB stress test

Analysis

OTP Bank, the only Hungarian participant in the European Central Bank's stress test, does not need to modify its Common Equity Tier 1 capital, given that the review found only negligible deficiencies, the National Bank of Hungary (MNB) announced after the European Banking Authority (EBA) published the results of the stress test yesterday.

The test aims at assessing the resilience of participating European banks during a three-year projection under a hypothetically adverse macroeconomic scenario using common methodology developed by the EBA. The OTP Bank was the only bank from Hungary participating in the 2014 stress test as it is the dominant representative of the local financial sector with a market share exceeding 25% in terms of total assets. Through its subsidiaries, OTP Bank is present in eight countries in the CEE region.

With respect to capital position, which is the most important component of the stress test, OTP Bank fared well. The MNB noted that losses resulting from the provisions of the Settlement Act were not taken into account by OTP Bank, but were indicated in data to be published by the EBA.

European banks with substantial Hungarian presence also passed ECB's stress test, the exception being Belgium's AXA Bank Europe, which has already raised its capital.

The review also found that other European banks with Hungarian subsidiaries, Austria's Erste Bank and Raiffeisen Bank, Belgium's KBC Group, Germany's Commerzbank and Deutsche Bank, France's BNP Paribas, Italy's Intesa Sanpaolo and UniCredit and the Dutch ING Bank all had Common Equity Tier 1 capital ratios which met the required level.

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