Banca Mediolanum SpA has passed a yearly European Central Bank (ECB) stress test confirming a Core Tier 1 (CET1) ratio of 19.7%, regulators said Friday. The ECB carried out a comprehensive assessment, including an asset quality review (AQR), of Mediolanum and three more European lenders: Abanka d.d. (Slovenia), Rietumu Banka (Latvia) and Citibank Europe PLC (Ireland). The ECB tests all banks that become or are likely to become subject to its direct supervision, and regularly conducts such exercises in regard to banks that have recently been classified as significant or that may become significant. The CET1 ratio represents retained earnings and common equity divided by risk-weighted assets. If the bank has a large enough capital cushion, it should survive an economic downturn.
Failure to maintain the ratios can lead to a credit rating downgrade and failure to meet regulatory requirements.
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