ECB comprehensive assessment for the DZ BANK Group: asset quality review (AQR) shows no conspicuous aspects, stress test passed without taking the capital increase into account
- Asset quality review shows no conspicuous aspects
- Stress test passed with a common equity Tier 1 ratio of 6.0% in the adverse scenario
- Financial year 2014: scope for strengthening capital further through retained earnings
- Common equity Tier 1 ratio after capital increase: 11.9% as at 30 June 2014
- Wolfgang Kirsch: "Our business model has proven itself to be robust and sustainable."
The DZ Bank Group has successfully passed the European Central Bank's (ECB) comprehensive assessment. At the core of this assessment was an asset quality review and a stress test, the results of which were published by the ECB today at 12.00.
DZ BANK's results in detail:
Asset quality review: good result – no conspicuous aspects
Some 50% of DZ BANK Group's customer-driven business was reviewed within the scope of the asset quality review. In the outcome, DZ BANK's common equity Tier 1 ratio was lowered by approximately 0.2%-points at year-end 2013, using a so-called stricter regulatory approach. This adjustment is fully attributable to the ECB's methodical approach that deviates from the IFRS accounting standards. The asset quality review therefore requires no relevant adaptation to the accounting policies.
Stress test: passed even without taking the capital increase into account
The ECB stress test was based on the scenario of a sharp economic slump with the corresponding upheaval on the financial and capital markets. This included, among other things, assumptions of higher credit defaults and rising interest rates that cannot be passed on to clients in full. The additional capital adequacy requirements arising from the acceleration of the CRR were also taken into consideration over the three-year observation period. All told, the stress test in the so-called "adverse" scenario, taking the AQR results into account, lowers DZ BANK's common equity Tier 1 ratio from 9.2% as at 1 January 2014 to 6.0% as at 31 December 2016. DZ BANK therefore passes the stress test as its common equity Tier 1 ratio exceeds the minimum ratio of 5.5%. Taking account of the EUR 1.5 billion capital increase concluded in July, the relevant stress test ratio would have been 7.2%.
Current capital situation: significant progress due to the capital increase and business development in 2014
Not withstanding the capital increase, the DZ BANK Group also significantly developed its capital base in H1 2014 thanks to its good operating business performance. The common equity Tier 1 ratio of 9.2% as at 1 January 2014 increased to 11.9% as at 30 June 2014 on the back of the positive business development and taking the capital increase into account on a pro forma basis.
"Our banking group proved itself to be resilient and robust and our business model to be sustainable in the European Central Bank's comprehensive asset quality review", said Wolfgang Kirsch, CEO of DZ BANK AG. "At the same time, the result of the stress test confirms our commitment towards increasing our scope for cushioning the growing regulatory requirements with the capital increase conducted in the first half of 2014. Considering our current capitalisation and our ability to retain earnings, and moreover thanks to our integration into a fundamentally strong banking group, we are well-equipped to meet further regulatory requirements”, Kirsch stated.
The full results of the Comprehensive Assessment are available on the European Central Bank website https://www.ecb.europa.eu/ssm/assessment/html/index.en.html