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Resultados de la prueba de esfuerzo al sector financiero español

Fernando Jiménez Latorre (Izda) y Fernando Restoy. Foto EFE

June 21, 2012

Results of the stress test of the Spanish financial sector

The Ministry of Economic Affairs and Competitiveness and the Banco de España have today received two individual reports by two independent appraisers, Roland Berger and Oliver Wyman, on the Spanish financial sector. The result of the exercise is recapitalisation needs of between €16 billion and €26 billion under the baseline scenario of the stress tests, and of between €51 billion and €62 billion under the adverse scenario.

The analysis was performed on 14 banking groups, comprising 90% of the sector. And although the exercise does not allow prior estimates to be made of the capital required for each bank, it is anticipated that the three largest banks will meet capital requirements even in the face of a hypothetical severe deterioration in the Spanish economy. The biggest shortfalls are concentrated in the banks in which the FROB has a majority holding. The remaining banks could meet their capital requirements by themselves or with a modest level of public aid.

What is involved here is an initial and extensive transparency exercise, based on the entire credit portfolio of the banks, as a prior step to an itemised analysis of balance sheets by four audit firms, to be concluded in the coming weeks. The exercise is in response to the Government's decision to generate confidence in the Spanish financial system’s soundness as part of its European commitments. The figure for recapitalisation needs is manageable, confined and is, in any event, below the amount of €100 billion agreed by the Eurogroup on 9 June as a credit facility.


The Council of Ministers agreed on 11 May to entrust the Ministry of Economic Affairs and Competitiveness with an analysis of the resilience of the Spanish financial sector in the face of a potential deterioration in the economic situation. Subsequently, the Banco de España, in coordination with the Ministry of Economic Affairs and Competitiveness, decided to hire Roland Berger and Oliver Wyman as independent appraisers to conduct this assessment.

Under the schedule set, the two consultancies have completed their analysis and have today informed the Banco de España and the Ministry of Economic Affairs and Competitiveness of the results. The stress test is complementary to that recently conducted by the International Monetary Fund (IMF). The two firms have also published a detailed report on the test performed, the methodology, the models and the assumptions formulated.


Each of the exercises is applied to 14 Spanish banking groups, representing around 90% of the system. The aim is to assess the resilience of the sector under two macroeconomic scenarios in maintaining a capital ratio in accordance with EBA (European Banking Authority) criteria. The timeframe of the exercise spans three years: 2012, 2013 and 2014. The evaluation covers the credit portfolios of the resident private sector, including real estate assets. The data refer to the balance sheets as at 31 December 2011.

What is involved is an additional test to that conducted by the IMF (FSAP) and published on 9 June. In the new assessment, the macroeconomic scenario used is more adverse and conservative; the time period covers an extra year and includes the appraisers’ assumptions on refinancing, loan reclassification and the quality of collateral. For consistency with other stress tests conducted in the European Union and in order to make for readier comparison, the requirement for the core Tier1 capital ratio has been set at 6% for the adverse scenario and at 9% for the baseline scenario.

The macroeconomic scenarios and the capital levels have been decided by the Steering Committee, comprising the Ministry of Economic Affairs and the Banco de España, bearing in mind the recommendations of the Advisory Committee, formed by the European Commission, the European Central Bank (ECB), the EBA, Banque de France, de Nederlandsche Bank and the IMF.

The working methodology for conducting the stress tests is based on models, assumptions and the hypotheses formulated by the two consultancies hired. To calculate the resilience of the banking sector, the expected losses on loan portfolios after the impact of the macroeconomic scenarios used have been taken into account, along with the assumptions of risk and the parameters of the appraisers themselves. The capacity of the banks to assume losses through the generation of profits and capital buffers have also been assessed.


The reports published by the two consultancies include an estimate of the capital required for Spanish banks. Under the baseline scenario, and with a core Tier1 capital ratio of 9%, the capital needed would be between €16 billion and €26 billion. Under the adverse scenario, with a minimum core Tier 1 capital ratio of 6%, the capital required would range from €51 billion to €62 billion. These figures are conservative, since they do not take into consideration mitigating effects such as future measures that the banks may potentially adopt or fiscal factors.

The current exercise does not allow prior estimates of the needs of each bank to be made. But it is anticipated that the three largest Spanish banking groups will not need additional capital in the face of a severe deterioration in the economy (adverse scenario). Recapitalisation will essentially be concentrated in those banks in which the FROB has a stake. The capital needs of the rest of the sector will be on a lesser scale or nonexistent. Capital requirements that can not be covered by market mechanisms would, in any event, be assumed by the FROB. The results of this exercise confirmed the recent findings of the IMF,which indicated that Spain's banking problems are confined to a small group of institutions, on which the State is already taking action.

Further measures

In tandem with this process, the four audit firms engaged by the Banco de España (Deloitte, PwC, Ernst & Young and KPMG) have been working since the end of May on an exhaustive analysis of the banks' portfolios. They should complete this analysis by 31 July 2012. With this exercise, they will verify the real situation of each bank, paying particular attention to the correct classification of loans, both in terms of business segment and status (current in payment, at risk of default or non-performing), and to the provisioning levels of each portfolio. The work of the audit firms companies will be used to construct a broader and more detailed (bottom-up) test of the banks' balance sheets. It is envisaged this analysis will have been completed in September.

The work of the audit firms and the more detailed information on the exposures in the banks' portfolios will be the basis for a fresh round of stress tests, which will identify the specific capital requirements of each bank. The results of these individual assessments will be published mid-September. Thereafter, the banks will have a short period of time within which to submit their detailed recapitalisation plans. The banks that cannot comply with these plans on their own may access funds from the FROB in accordance with the conditions imposed.

The final results will allow a distinction to be made between banks requiring recapitalisation and those that need restructuring, in accordance with EU rules and procedures. During this period all the agreements needed to apply this comprehensive strategy will be concluded, including those on European financial aid and EU rules on state aid.

For more information, click on the following links:

Macroeconomic scenarios see attached documents


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