ECB: Croatian banks can withstand a strong shock, Vujčić satisfied with the result

The Governor of the Croatian National Bank (HNB) Boris Vujčić expressed satisfaction on Friday that the assessment by the European Central Bank (ECB) confirmed that Croatian banks are well-capitalized and can withstand a very strong negative shock. 

"We are pleased that the asset quality assessment and stress test of our banks by the ECB confirmed that Croatian banks are well-capitalized and can withstand a very strong negative economic shock," Vujčić emphasized in his first, brief comment on the ECB’s announcement. The European Central Bank announced today that the five banks covered by the comprehensive assessment – Zagrebačka banka, Privredna banka Zagreb, Erste&Steiermärkische Bank, OTP banka Hrvatska, and Hrvatska poštanska banka –  have sufficient capital levels for regular operations, as well as for stressful economic scenarios.

"The comprehensive assessment found that none of the five banks assessed have capital deficiencies as their ratios were not lower than the minimum ratios used in the asset quality review and stress testing," the ECB reported, which was also conveyed by the HNB.

Following the ECB’s announcement, the five Croatian banks covered by the comprehensive assessment reacted with statements or announcements on their websites, emphasizing that the results confirm the quality, strength of the balance sheet, and operational performance, as well as resilience in adverse scenarios. 

PBZ achieved excellent results and demonstrated strong resilience in adverse scenarios 

Privredna banka Zagreb (PBZ) emphasizes that it achieved excellent results and demonstrated strong resilience in adverse scenarios. 

The comprehensive assessment of banks consisted of an asset quality review (AQR) and a stress test, which involved testing resilience to shocks in a scenario that included negative macroeconomic trends (recession), unfavorable interest rate movements, and significant materialization of credit, market, operational, and legal risks.

The comprehensive assessment was conducted at the consolidated level of the PBZ Group, and from the published results of the ECB, PBZ highlights that the asset quality review identified immaterial adjustments impacting the capital adequacy ratio by one basis point (1 b.p.). 

The stress test showed a total reduction in the capital adequacy ratio of 537 basis points, or a common equity tier 1 (CET1) ratio of 16.4 percent in the adverse scenario, PBZ reports.

"PBZ fully acknowledges these results and considers them primarily a confirmation of its financial stability, but also a confirmation of the adequacy of internal rules and procedures in risk management. A capital adequacy ratio of 16.4 percent under stressful macroeconomic conditions and after significant shocks demonstrates the strong resilience of the PBZ Group to unexpected events to a degree that significantly exceeds regulatory requirements. Additionally, these results confirm the stability and reliability of PBZ in the domestic banking market," concludes the PBZ statement.

Zaba: Confirmed balance sheet strength and good risk management

Zagrebačka banka (Zaba) reports that a thorough and comprehensive assessment confirmed the resilience of the bank to a stressful macroeconomic scenario due to the bank’s strong capital position, with a maintained common equity tier 1 (CET1) ratio of 21.28 percent since June 2019. Applying the ECB’s methodology, after the asset quality review and stress testing, the CET1 capital ratio is 20.46 percent in the baseline scenario and 13.94 percent in the stress scenario.

"The asset quality assessment in the comprehensive assessment confirmed the strength of the balance sheet and good risk management of Zagrebačka banka. The strong results of Zagrebačka banka showed that there are no regulatory requirements for capital measures and allow the Bank to focus on providing exceptional services to its clients," the bank announced on its website.

Zagrebačka banka will continue to support the real economy, be at the service of clients, promote market growth with responsible credit risk management, and provide sustainable values, the announcement concludes.

ECB: Important message for meeting the conditions for access to ERM2

The CEO of Erste Bank Christoph Schoefboeck expressed satisfaction in a statement that the bank successfully passed through the comprehensive assessment process, which consisted of an asset quality review and related stress test.

The result, he emphasizes, showed that the bank has an adequate capital position and also confirmed the quality of risk management policies and the overall correctness of the business model, based on monitoring all financial needs of citizens, as well as quality projects in the economy.

"Additionally, the positive assessment that the Croatian banking sector has generally deserved represents a very important message in terms of meeting one of the last conditions for access to the European Exchange Rate Mechanism (ERM2), which brings Croatia one step closer to introducing the euro, or realizing the strategic goal that will contribute to long-term financial stability and bring many benefits to citizens and the economy as a whole. Furthermore, the confirmation of the stability of the Croatian banking system is encouraging in the context of the challenges currently facing the Croatian economy, where a strong and adequately capitalized banking sector will be a pillar and support for creating renewed economic growth and ensuring the prosperity of the entire community," concludes Schoefboeck. 

OTP banka: Proven strong capital position and stability of the bank

"The comprehensive assessment of asset quality and stress resilience conducted by the ECB ended with excellent results for OTP banka in both parts of the process. The minimal, extremely low, and immaterial impact of the asset quality review (AQR) on OTP banka’s capital adequacy ratio (0.11 percentage points) is even more significant when considering the conservative approach of the central European bank," OTP banka emphasizes, noting that they were subjected to the review immediately after the demanding integration process of Splitska banka.

They highlight that the fact that OTP banka passed the stress test "significantly above the prescribed minimums and regulatory requirements confirms the current strong capital position and stability of the bank, providing adequate protection against potential unforeseen losses and ensuring the necessary resilience to stress caused by even the most unexpected adverse economic conditions."

The positive findings are, as they state, a confirmation of the quality of the bank’s internal processes and just another proof of the cautious and careful process of classifying placements into appropriate risk groups and a conservative approach to forming value adjustments.

"We are extremely satisfied with the findings of the AQR assessment and stress test, which demonstrate that with responsible business policies we successfully face all market challenges and deserve the full trust of our clients. This test is particularly important for us and for the entire OTP Group, as it followed immediately after the integration process that created the fourth largest bank in the country, and confirmed that we successfully carried out the complex integration in all segments," said OTP banka CEO Balázs Békeffy.

HPB – additional confirmation of quality and resilience of the balance sheet

Hrvatska poštanska banka (HPB) emphasizes that they received "additional confirmation of quality as well as the resilience of the balance sheet and operational performance" in the ECB assessment.

They remind that the assessment consisted of an asset quality review (AQR), along with simultaneous testing of the bank’s resilience to stress, and HPB successfully passed both procedures.

"The asset quality review was supplemented by stress testing, which observed how the capital positions of banks would change in the baseline scenario and in the adverse scenario over a three-year period from mid-2019 to mid-2022, and it was concluded that HPB successfully passed all checks, and HPB’s capital exceeded the set thresholds. In this way, Hrvatska poštanska banka received additional confirmation of the quality and resilience of its balance sheet and operational performance, which provides us with the impetus and responsibility to ensure the prerequisites and continue in the direction in which HPB will achieve its strategic goals," HPB emphasizes.