Slovak stress tests show banking sector well shielded

Analysis

A stress test by Slovakia has shown its banks have sufficient capital buffers to withstand shocks, although their profitability could be severely hit as growth prospects worsen in the small euro zone member, Reuters reported. The sector’s capital adequacy was 15.7% at the end of 2012, the highest since 2005, and probably reached 16.6% after the anticipated retention of some earnings for the last year. The weakest bank showed a 12.3% capital buffer. Under all three model scenarios, banks in the euro zone member would keep capital adequacy way above the 8% required by the Basel banking regulations implemented since the 2008 financial crisis. The central bank said that under its baseline scenario, which sees 1.3% growth this year, no bank would require additional capital.

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