ECB published the results of a comprehensive assessment of Šiaulių Bankas
- A comprehensive assessment was carried out after the ECB started directly supervising Šiaulių Bankas.
- The Bank underwent an asset quality review and a stress test.
- The exercise did not reveal any capital shortfalls.
The European Central Bank (ECB) today announced the results of a comprehensive assessment of Šiaulių Bankas AB. Such an assessment was initiated when Šiaulių Bankas, as one of the three largest credit institutions in the Republic of Lithuania, was classified as a significant institution on 1 January 2020 and the ECB began to exercise direct supervision over the bank. All banks that become (or are likely to become) subject to direct ECB supervision are required to undergo a comprehensive assessment, consisting of a stress test and an asset quality review (AQR).The comprehensive assessment also determines whether the bank's capital base needs to be strengthened.
"Being among the three most significant credit institutions in Lithuania is a huge responsibility, therefore, such an exam was a great opportunity to test our readiness to meet the highest requirements while not losing focus on our customers in these globally difficult times. The evaluation process was intensive and required a lot of the Bank's internal resources, but that is what we have expected - despite the unpredictable circumstances of the pandemic, we believe that the evaluation went efficiently and smoothly. I would like to thank all the colleagues and partners who worked with this process and ensured the successful course of the verification“- said Vytautas Sinius, Chief Executive Officer of Šiaulių Bankas.
The asset quality review exercise 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 Šiaulių Bankas). The AQR was carried out on the basis of the ECB’s latest version of the AQR methodology, which was published in June 2018.
The AQR was complemented by a stress test exercise, which looked at how the banks’ capital positions would evolve under a baseline scenario and an adverse scenario over the three-year period from 2020 to 2022. The scenarios have been updated considering projections made around mid-2020, covering the consequences of the COVID-19 pandemic that started in the first quarter of 2020, which led to significant uncertainties about future economic developments at the time of the projections. The stress test forecasts for the Lithuanian economy were based on the Bank of Lithuania's economic forecasts published on 5 June 2020, which were particularly pessimistic (the baseline scenario envisaged a fall in Lithuania's GDP of 9.7% in 2020 and a recovery of 8.3% in 2021; the adverse scenario - a fall in GDP of 17.0% in 2020 and zero growth in 2021). Even in the case of such particularly strict scenarios, the capital base of Šiaulių Bankas was sufficient and exceeded the set thresholds:
Evolution of CET1 ratios and resulting capital needs
|Initial CET1 ratio|
(As of 31/12/2019)
|CET1 ratio post-AQR |
(As of 31/12/2019)
|CET1 ratio in baseline scenario||CET1 ratio in adverse scenario|
|19.95 %||17.75 %||16,48 % (should be ≥ 8 %)||7,02 % (should be ≥ 5.5 %)|
The comprehensive assessment revealed that Šiaulių Bankas did not face any capital shortfall, i.e. the capital did not fall below the relevant limits set during the stress test and asset quality review. The asset quality review revealed areas for improvement - without waiting for the final findings of the process, Šiaulių Bankas already in 2020 had restructured its credit risk assessment system, which resulted in a certain increase in the level of non-performing loans and provisions.
The ECB's assessment is available here: ECB concludes comprehensive assessment of two Italian banks, and one Estonian and one Lithuanian bank (europa.eu).
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