This report clarifies the difference between the EBA
tests and the ECB tests; recaps the basic results of banks that
failed the tests; and compares existing CoCo trigger levels
with the test results.
1. What did the EBA and ECB test?
On October 26 2014, the EBA and ECB published the results of
the European stress tests.
The EBA tests are based on a sample of 123 banking groups in
the 28 EU countries.
The tests measure the CET1 ratio, the fundamental indicator
of a bank’s health under CRD IV, in standard
(baseline) and adverse economic projections. The projections
are modelled on a 3-year horizon to 2016 and assume a static
bank balance sheet, meaning the balance sheet is frozen as at
the end of 2013 with the assumption that no growth would occur
over the time horizon:
The baseline scenario assumes economic development in line