The European Central Bank (ECB) has completed a comprehensive assessment including stress test of four banks.
The four lenders were Italy’s Cassa Centrale Banca and Iccrea Banca, Estonia’s Luminor Bank AS and Lithuania’s Akcinė bendrovė Šiaulių bankas.
Under the test, the lenders did not face any capital shortfalls.
The stress test involved testing the resilience of the banks under an adverse scenario involving period of sharp economic contraction following the outbreak of the Covid-19 pandemic. It was conducted using the 2020 EU-wide stress test methodology.
The stress test comes after the four lenders fell under the ECB’s supervision.
The banks also cleared the asset quality review (AQR), however, they are expected to follow-up and initiate actions to address the findings of the AQR.
In a statement, ECB said: “The AQR is a prudential rather than an accounting exercise, and provides the ECB with a point-in-time assessment of the carrying values of a bank’s assets on a particular date (31 December 2019 in the case of these four banks).
“The AQR also determines whether there is a need to strengthen a bank’s capital base. Owing to the nature of the AQR as a point-in-time exercise and given that the reference date used pre-dates the outbreak of the coronavirus (COVID-19) pandemic in Europe, the AQR results do not include the impact of the ongoing COVID-19 crisis.
“The AQR for the banks was carried out on the basis of the ECB’s latest version of the AQR methodology, which was published in June 2018.”