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Eurobank EFG Stress Test

The stress test conducted on 91 banks at a paneuropean level by the Committee of European Banking Supervisors (CEBS) confirms the robust capital position of Eurobank EFG. As per the stress test results, even under the extreme and highly unlikely sovereign shock scenario, Eurobank EFG enjoys a capital buffer twice the size of the lower regulatory level of 4%.
It is worth noting that the extreme scenario applied on Greek banks is particularly harsh – it is neither real nor even likely to materialize. For example, the additional sovereign shock stipulates additional provisions – on top of those resulting under the adverse scenario – in excess of 3.2% of the loan portfolio of Greek banks. The relevant burden in other countries does not exceed 1%, ranging from 0.05% (Germany) to 0.9% (Portugal).
Regarding the Greek macroeconomic environment, the most painful measures related to the Memorandum have already been adopted by the Government. The Hellenic Stability and Growth Programme is progressing as planned, delivering results beyond the initial targets in the first half of 2010. Moreover, the recession in the Greek economy, as forecasted by the IMF, will be lower than previously foreseen. In spite of these facts, the extreme scenario adopted in the stress tests assumes that economic conditions in Greece could severely deteriorate bearing a negative impact on the Greek banking system. Today (i.e. before the application the stress tests) the Greek banking system enjoys high capital adequacy ratios, largely on account of the prudence of Greek banks to bolster capital levels within 2009.
As attested by the stress tests, due to its strong capital adequacy and high pre-provision income, Eurobank EFG is capable to absorb provisions which under the most extreme scenario could reach €4bn cumulatively over the next two years, maintaining at the same time a Tier I ratio above 8%.