MFSA, CBM stress test on BoV

The Malta Financial Services Authority and the Central Bank are both currently involved in the EU's Committee of European Banking Supervisors stress test exercise across EU member states, the Central Bank said on Thursday. Both are collaborating with BoV to carry out the stress test.

A total of 91 banks from all member states are participating in this exercise. When drawing up the list of banks representing at least 50 per cent of banking assets in each member state, banks that are subsidiaries of foreign parents were not included. Subsidiary banks will however be stress tested with their parents, since these tests have to be conducted on a consolidated basis. This means HSBC Bank Malta plc will be stress tested by the UK authorities, as part of HSBC Holdings plc, its parent institution.

The supervisory authorities in each member state are involved in this exercise which is being conducted in close co-operation with the European Central Bank.

The Central Bank highlighted that last year, CEBS, a group of EU national finance regulators, had already carried out an EU-wide stress test assessing the resilience of the major European banks.

Following the discussion of the 2009 results, CEBS was again mandated to carry out a second stress test assessing possible shocks on credit and market risks and the availability of capital for further lending.

The second stress test, which was launched in March, has now been extended to include sovereign risk. Moreover, the exercise has been broadened to cover, in each EU member state, those banks whose aggregate total assets represent at least 50 per cent of the assets of the banking sector as a whole. The consolidated exercise applies a set of commonly agreed macro-economic scenarios for 2010 and 2011.

The results of the stress tests of all participating banks will be made public on July 23.