All four participating Dutch banks performed well above the minimum standard, defined as a core tier 1 ratio of 5.0 per cent. The average core tier 1 capital ratio of the four Dutch banks at end-2010 stood at 10.6 per cent of their risk-weighted assets. In the stress test, the average core tier 1 ratio of the four participating banks decreased to 9.4 per cent. One may conclude that the Dutch banking industry performed strongly in the recent EU-wide stress test.
In the stress test banks modeled the implications of a hypothetical stress scenario, to see whether they would be able to bear the ensuing losses. The criterion applied was the impact on banks’ core tier 1 ratio, a solvency indicator in which only the highest quality part of banks’ capital is counted. All in all, under the adverse scenario, Dutch banks would write down EUR 19 billion of their assets, about one quarter of their core tier 1 capital. They are most sensitive to losses on their commercial real estate portfolios. Under the stress scenario the rates Dutch banks have to pay on their financing increase by one half or more. Notwithstanding the substantial impact of the stress scenario, each individual bank remains amply capitalised.
The results of the exercise were thoroughly examined for correctness and consistency by both DNB and the EBA. The individual participating Banks will disclose details about their own results. Also, they will provide details on the magnitude of their exposures to individual EU countries, broken down by sector: sovereign bodies, banks, consumers, enterprises and commercial real estate. Moreover, banks will disclose their government bond holdings, differentiated by country and by maturity.