PKO Bank Polski confirms high resilience to adverse macroeconomic scenarios

The EU-wide stress test, carried out across 91 banks covering over 65% of the EU banking system total assets, seeks to assess the resilience of European banks to severe shocks and their specific solvency to hypothetical stress events under certain restrictive conditions. The assumptions and methodology were established to assess banks’ capital adequacy against a 5% Core Tier 1 capital benchmark and are intended to restore confidence in the resilience of the banks tested. The tests were  carried out on the basis of restrictive macroeconomic assumptions (covering GDP growth, unemployment rate, inflation, interest rates, exchange rates and changes in real-estate prices) prepared by the ECB for each of the EU countries. The stress test has been carried out using a static balance sheet assumption as of December 2010. The stress test does not take into account future business strategies and management actions.

The baseline scenario established for the tests was based on economic forecasts of the European Commission of autumn 2010, while the adverse scenario assumed the following economic events in the years 2011-2012: a series of internal shocks in the European Union (connected with, among others, the ongoing sovereign debt crisis of the eurozone states), worldwide negative demand shock, originating in the United States, and the depreciation of the US dollar against other currencies.

As a result of the assumed shock, the estimated consolidated Core Tier 1 capital ratio of PKO Bank Polski would change to 12.2% under the adverse scenario in 2012 compared to 11.8% as of end of 2010 (including retained profit for 2010). At the same time, the minimum benchmark of 5% established by the organisers of the stress tests would be exceeded considerably.

- Both last year's and this year's edition of the tests confirm that PKO Bank Polski is one of the most resilient institutions to shocks among those participating in the test. It shows a profit in every scenario. At the same time it should be remembered that this type of analysis is only a supplement to the risk management procedures and periodic stress tests conducted internally by the Bank – said Zbigniew Jagiełło, President and CEO of PKO Bank Polski.

The high resilience of PKO Bank Polski to the adverse macroeconomic scenario confirmed by the results of the tests, is due to, among others, the concentration of the Bank's activities on the territory of Poland (characterised by a stable macro-economic situation), strong capitals, mainly based on accumulated profits, and the domination of traditional financial instruments (loans and deposits) in the Bank's balance sheet.

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Website of the Polish Financial Supervision Authority (Komisja Nadzoru Finansowego): http://www.knf.gov.pl/en/index.html