BOV obtains good result in stress test

Bank of Valletta has passed the European stress test obtaining 10.4 per cent against the five per cent pass mark and the statutory minimum ratio of four per cent.

The aim of this annual test, which covers more than 65% of the European banking system, is to evaluate the resilience of banks in the face of a hypothetical scenario which, this year, included an economic downturn, distressed financial markets and a sharp increase in defaulting loans.

Bank of Valletta was again selected to represent the local banking sector in this test.

The test result is expressed in terms of the Bank's "Core Tier 1 ratio." This ratio, which relates shareholders' funds to risk-weighted assets, is the measure used internationally to evaluate the resilience of banks. BOV's stressed Core Tier 1 ratio was calculated at 10.4 per cent, which is significantly above the "pass mark" ratio of five per cent and the statutory minimum ratio of four per cent.

Eight of the banks subjected to the stress test failed to make the mark; another 16 displayed a Core Tier 1 ratio of between five and six per cent.

BOV chairman Roderick Chalmers said this was a “good result” for BOV and represented the latest external confirmation and endorsement of the strength and resilience of the bank and its balance sheet, even under extreme conditions. 

BOV, Mr Chalmers said, has passed this year’s stress test “with relative comfort”, as it had done a year ago.

“The bank’s strength is the result of prudent capital management, a cautious risk appetite and the adoption some years ago of a responsible and sustainable dividend payout policy,” he said.

“Stress tests on capital and liquidity buffers are a regular part of our internal risk management processes, which help us to safeguard the stability of the bank in an environment that continues to be marked by competition and uncertainty.”

Mr Chalmers described the result as “a credit to Malta and its prudent regulatory regime, to Bank of Valletta, and to the local financial services sector in general.”

He thanked the bank’s customers for their continuous support, and the executive team and staff for the dedication and professionalism with which they carried out their duties.

The full results can be seen at:

http://www.centralbankmalta.org/site/pr1main.asp?ItemId=656