This CT1 definition will be used solely for the purpose of the EU-wide stress
test and refers to specific criteria which will be applied consistently across
all countries participating in the exercise.
This definition is based on existing EU legislation in the Capital Requirements Directive (CRD). It takes the existing EU definition of Tier 1 net of deductions of participations
in financial institutions and it strips out hybrid instruments including existing
preference shares. It recognises existing government support measures, which will
be identified separately in the results.
To ensure a fully harmonised computation by all the banks involved in the exercise,
the EBA has mapped the different capital elements of CT1 to the current COREP reporting framework.
Only commercial instruments of the highest quality are included in this CT1 definition
– ordinary shares or similar instruments in line with the principles detailed
in CEBS/EBA guidelines on core capital.
This means, in particular, that the commercial instruments included in CT1 have
to be simple, issued directly by the institution itself and able, both immediately
and without any doubt, to meet the criteria of permanence, flexibility of payments
and loss absorption in going concern situations. The inclusion of government support
measures in this definition reflects the expectation of supervisors that those
instruments will be fully available to absorb losses and shelter banks in case
of difficulties.
To ensure full transparency, the stress test will include full disclosure of
all capital elements included in CT1 and their evolution since December 2010,
under both the baseline and the adverse scenarios.
The 5% CT1 benchmark is not a legal minimum requirement. However, the EBA expects
any bank failing to meet the benchmark, or showing specific weaknesses in the
stress test, to agree with the relevant supervisory authority the appropriate
remedial measures and execute them in due time. The EBA expects these measures
to be disclosed separately.
This year, the sample contains 90 banks, including a number of banks which were
not included last year. No banks have dropped out of the 2010 sample except in
cases where they no longer exist in their present form. The current sample continues
to represent more than 65% of banking assets in the EU and more than half of the
banking assets in all individual EU countries.
08 April 2011
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Notes to editors
Reference is made to the consolidated version of the CRD as provided in the EU Commission’s website
The EBA has also released four supporting documents to assist in the understanding
of the definition of capital:
-
The first one is the sample of banks involved in the EU-wide stress exercise.
-
The second is a technical template which outlines the criteria used in defining
Core Tier 1 for the EBA’s 2011 EU-wide stress test. It maps map the criteria against
the existing COREP framework for ease of reference. The disclosure of capital
will be made at this level of granularity in the stress test results.
-
The third is a draft of the publication template which will be used for disclosing
the high level outcome of the stress test in 2012.
-
The fourth is a template which outlines the way in which mitigating measures
will be disclosed.
Press contact:
Ms. Franca Rosa Congiu
Tel: +44 20 7382 1781
francarosa.congiu@eba.europa.eu
www.eba.europa.eu
