1. Comprehensive Assessment An Austrian Supervisors’ Perspective*) Claus Puhr Vienna, 11 November 2014 Supervision Policy, Regulation and Strategy Division Oesterreichische Nationalbank *) Please note that the views expressed in this presentation represent the author’s opinion and do not necessarily reflect the OeNB’s or the ESCB’s or the SSM’s position (all data used is publicly available from the EBA/ECB websites).

2. www.oenb.atoenb.info@oenb.at - 2 - Comprehensive Assessment | Stress Test Scenario The scenario is fairly similar across countries … Annual GDP Growth (AT) Annual GDP Growth (EA) Cum. GDP Shock 1) AT EA EU CESEE 2) Baseline Adverse WEO Oct. 2014 (AT) WEO Oct. 2014 (EA) 1 ) Deviation Baseline / Forecast vs. end-2016 under the adverse scenario 2 ) CESEE = regional GDP-weighted average of EU member states

3. www.oenb.atoenb.info@oenb.at - 3 - Comprehensive Assessment | AQR-Impact … but neither the AQR impact is similarly consistent … Change of the NPE-Ratio 1 during the Asset Quality Review 1 ) NPE-Ratio = Non-performing exposure divided by total exposure of those portfolios selected for the AQR 2 ) Average RWA-weighted change of the NPE-Ratio across all 130 SSM banks EA mean 2 111bp ÖVAG 410bp EGB 360bp RLB-OÖ 360bp RLB-NÖW 320bp BAWAG 200bp RZB 120bp

4. www.oenb.atoenb.info@oenb.at - 4 - Comprehensive Assessment | Total Impact … nor the impact of the stress test (the result‘s main driver) Change of the CET1-Ratio 1 end-2013 to end-2016 (adverse scenario) EA mean 2 340bp ÖVAG 940bp EGB 360bp RLB-OÖ 350bp RLB-NÖW 570bp BAWAG 600bp RZB 260bp 1 ) CET1-Ratio for the purpose of the stress test defined as the CRR implementation under phase-in rules 2 ) Average RWA-weighted change of the CET1-Ratio across all 130 SSM banks

5. www.oenb.atoenb.info@oenb.at - 5 - Comprehensive Assessment | Implementation Matters How to explain the deviations across sample-banks  While individual scenarios are quite comparable, this does not hold for all risk factors  Impact is generated only indirectly via scenarios  The current state-of-affairs as well as the past matter (because of econometrically-modelled relative parameter shifts)  Moreover, some risk factors are treated more punitive than others  The static balance sheet assumption is quite restrictive  This drives results from the extrapolation of past / obsolete costs …  … to off-setting potential hits from FX-movements  The stress test is conducted as a bottom-up exercise  i.e., banks calculate their own results (subject to quality assurance)  We observe two kinds of bias (at least for AT banks): small banks and/or better capitalised banks produce tougher results

6. www.oenb.atoenb.info@oenb.at - 6 - Comprehensive Assessment | Interpretation Matters How to put stress test results to good use anyhow  EU-wide stress tests provide a lot more than headline results  The wealth of data is overwhelming, particularly in data-scarce Europe  This allows to put some of the shortcomings in perspective  And allows for a differentiated assessment of bank‘s risk bearing capacity  But be weary of stress tests‘ limitations  The methodology is the methodology  And consistency often trumps a more tailor-made approach  In all likelihood, stress tests will neither uncover new risks, …  … nor will they cover all known risks  To conclude, stress tests are one powerful supervisory tool, but they are – fortunately – far from the only tool

7. Annex

8. www.oenb.atoenb.info@oenb.at - 8 - Comprehensive Assessment | Stress Test Scenario A comparison with past EU-wide exercises Cumulated GDP Shock of previous EU-wide Stress Test Scenarios (Deviation of the baseline / forecast vs. end-of-adverse-scenario GDP level, in ppt) Source: ESRB

9. www.oenb.atoenb.info@oenb.at - 9 - Comprehensive Assessment | Overall Results Österreichische Banken leicht unter Mittelwert CET1-Ratios zum Ende des adversen Szenarios 2016 EA Mean 1 8,4% Hurdle rate 2 5,5% 1 ) Average RWA-weighted CET1-Ratio across all 130 SSM banks at the end of the adverse scenario 2 ) Minimum CET1-Ratio requirement at any stage under the adverse scenario (CRR phase-in definition)

10. www.oenb.atoenb.info@oenb.at - 10 - Comprehensive Assessment | Detailed AT Results AT results are driven by tough NII, CR and B3 phase-in shocks

11. www.oenb.atoenb.info@oenb.at - 11 - Comprehensive Assessment | Detailed EA Results EA-results (RWA-weighted) more moderated in comparison