Bank stress test July 2016

29 July 2016

• High stress resilience due to good portfolio quality
• Solid CET1 ratios under stress scenario and stricter “fully-loaded” criteria

Munich - BayernLB has received good grades on the EBA’s (European Banking Authority’s) stress test. The Bank has a solid capital base, even in a stress scenario, thanks to its good portfolio quality.

In its stress test for European banks, the EBA considered how two kinds of capital bases will be as at the end of 2018: One of these is from the so-called “phase-in” perspective. This takes account of all capital instruments that are currently still eligible for inclusion as core capital (CET1), such as silent partner contributions. The other kind of capital base, known as “fully-loaded”, already applies the more rigorous supervisory definition of CET1, which does not come into effect until 2018.

In the baseline scenario the capital ratio (fully-loaded CET1) was 12.4 percent. In the “stress scenario” - an adverse scenario which simulates the impact of an economic and asset price shock on banks – BayernLB's CET1 ratio was 8.3 percent. The capital ratio slipped by 3.7 percentage points under the stress scenario from the 12.0 percent recorded for 2015. This means that BayernLB also scored well in the stress scenario when compared to other banks.

The stress-triggered reduction was only by 3.7 percentage points in the “phase-in” view as well. Moreover, 3.2 percentage points stem from one-off phenomena related mostly to EUR 2.3 billion in silent partner contributions as at 31 December 2015. This will no longer be counted towards core capital (CET1) as from 2018, and EUR 1.3 billion of this amount has since been repaid. Thus the “phase-in” figure says little about BayernLB’s capital strength.

BayernLB considers its good “fully-loaded” grade as further testimony to the success of its new strategy and to the long-term stability of its business model as “The Bavarian bank for the German economy”.