In preparing this report, Oliver Wyman has also used information, reports This report has been prepared exclusively for the Banco de Espana. 16The report by Oliver Wyman is difficult to find as the consulting .. Popular NCG Banco Sabadell BMN Banesto Banca Civica Caja España-Duero Liberbank Banco de Espa˜na () “Informe sobre la crisis financiera y. Real Instituto Elcano – Madrid – España Los informes Elcano, cada uno de ellos fruto . The crisis eventually exposed the role of the Bank of Spain, which was initially Such assessment was conducted by the IMF first and later by Oliver. Wyman and Roland Berger, two private consulting companies, which in June

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Informe completo de Oliver Wyman sobre capitalizacin de la banca espaola. Post on May views. This report is intended to be readand used as a whole and not in parts. olivrr

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Informe completo de Oliver Wyman sobre capitalizacin de la banca espaola – [PDF Document]

No obligation isassumed, and Oliver Wyman shall have no liability, to revise this report to reflectchanges, events or conditions, which occur subsequent to the date hereof. The scope of the report has, at the request of the Infrome of Spain, been limitedexclusively to the areas banxa in section 1. All decisions in connection with the implementation or use of advice orrecommendations if any contained in this report are not the responsibility of OliverWyman.

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Context and objectives Description of the exercise Scope, purpose and limitations of the exercise Structure of the document Spain Financial Services current situation Characterisation espaoal the portfolios and key latent risks Credit loss forecasting Results of the stress testing exercise Loss forecasting and capital absorption framework overview 2Figure 2: Domestic Financial Institutions in-scope intorme 3: Main information used in the analysis4Figure 4: Key building blocks of the Stress Testing framework5Figure 5: Asset-class breakdown of in-scope assets 6Figure 6: Loss recognition in Spain 9Figure 7: Macroeconomic scenarios provided by Steering Committee11Figure 9: Historical Spanish economic performance vs.

Steering Committeescenarios 12Figure Credit quality indicators of historical Spanish macroeconomic indicators vs. Steering Committee scenarios13Figure Steering Committee scenario vs. Credit quality indicators Steering Committee scenarios vs. Credit loss forecasting framework15Figure Macroeconomic credit quality model: Retail Mortgages 19Figure Real Estate Developments 19Figure Illustrative recovery curves 22Figure Key foreclosed asset modelling framework components23Figure Loss absorption capacity espalla adverse scenario27Figure Expected loss forecast Aggregate level 28Figure Estimated expected losses Drill-down by asset class29Figure Estimated expected losses Real Estate Developers 30Figure Estimated expected losses Retail Mortgages 31Figure Estimated expected losses Corporates 33Figure Estimated losses infofme forecast Foreclosed assets 34Figure Implied RE price decline: Capital deficit under adverse scenario 35Figure The objective of this work is to assessthe robustness of the Spanish banking system and its ability to withstand a severelyadverse stress scenario of deteriorating macroeconomic and market conditions.

Top-down approaches consider the different historical performance and asset mix foreach institution at aggregate levels, applying conservative but similar estimates ofloss behaviour across banks when more detailed wykan loss drivers are notavailable.

In this way the top-down bnaca provide insight wynan the overall capitalneed of the system but are less well suited for bank-by-bank decisions on viabilityand the amount of possible capital needs.

Informe completo de Oliver Wyman sobre capitalizacin de la banca espaola

The scope of the work included the domestic oliiver book and excluded otherassets, such as foreign assets, fixed income and equity portfolios or sovereignlending. The result,released on June 8,was a total projected capital buffer requirement of 37 BN. Whereas sharing the same philosophy, our assessment differs from the first in threeimportant ways: We subjected each of these assetclasses to various stress scenarios formulated by the Steering Committee.

Thesevere stress scenario was more marked than similar exercises in most otherjurisdictions: Forexample, cumulative GDP contraction in the severe stress scenario was 6. Bank of Spain Stress Testing ExerciseExecutive Summary baseline scenario with a more benign macro-economic contraction for reference purposes.

The YE starting point of the fourteen banks under examination in aggregate is: Under the severe stress scenario, cumulative losses are: Adverse Scenario Losses fromLosses from Cumul.

The breakdown is as follows: Because projected losses and loss absorption capacity are quite unevenlydistributed across banks, the difference between losses and resources will naturallynot be equal to capital needs. In the absence of a more detailed bottom-up exercise, with its due diligence andmore detailed bank-portfolio level analysis, it is not possible at this stage to providebank-level results. Indeed because such information and data are not yet fullyavailable, the top-down estimates were conducted with a view to makingconservative assumptions on important parameters along the way.


The subsequentbottom-up process is intended to provide certainty at the individual bank level. Bank of Spain stress testing exercise1. IntroductionOn 10th May the Spanish Government agreed to commission two private andindependent valuations of the Spanish financial system. A Steering Committee was formed in order to coordinate and supervise ongoingprogress and make key decisions throughout the exercise.

Oliver Wyman was commissioned on the 21st of May olivdr provide an independentassessment of olicer resilience of the main banking groups, based on macro-economicstress scenarios formulated by the Steering Committee.

Description of the exerciseThe purpose of this exercise has been to undertake a top down stress testinganalysis to assess infrome resilience of the Spanish financial system under adversemacroeconomic conditions over 3 years This consisted of forecastingportfolio losses under various macro-economic scenarios and comparing them withthe loss absorption capacity for the banks under examination.

The differencebetween the two roughly corresponds to the additional system capital needs. Wedescribe below the three main components of the stress testing analysis. The expected loss forecast, includes: Credit portfolio losses for performing and non-performing loan portfolios fordifferent asset classes for the in-scope lending activities Foreclosed assets portfolio which reflects the difference between currentgross balance sheet asset values as of December 11 and estimated assetrealisation values, driven primarily by the expected evolution in underlyingcollateral prices as well as other costs associated with the maintenance andselling processes The loss absorption capacity forecasts, includes: Includes large and medium sized banks andexcludes small private banks, other non-foreign banks aside from the 14 listed, and the cooperative sectorOliver Wyman 1MAD-DZZ Bank of Spain stress testing exercise Earnings generating capacity includes pre-provisions and pre-tax profits forSpanish businesses and post-provisioning, post-tax for non-domesticbusiness Excess capital buffer, which increases the loss absorption capacity of thoseentities with capital volumes over the minimum post-stress requirements Balance sheet reduction, which accounts for the reduction in the capital needsas a result of the credit de-leverage across the period6Potential capital impact and resulting solvency position, which corresponds to excess losses over provisions and earnings minus additional capital generation, adjusting for expected deleveraging.

The diagram below illustrates the three main components of the top-down stresstesting analysis. Loss forecasting and capital absorption framework overview1 Expected loss forecast3 Capital impactCapital buffer Pre-provision profit2 Generic provisionsLoss absorption capacityProvisions onforeclosed assetsSubstandard provisionSpecificprovision provisions Non-performing loansForeclosed assetsProjected earningsExcess of capital buffer Performing loansNew bookLoss absorption capacity6Overall in this exercise, de-leverage has a negative impact on resilience of the system, by contracting theeconomy and therefore significantly rising expected losses.

However, we refer here to the fact that balancesheet reduction implies lower RWA requirements and therefore lower capital. Scope, purpose and limitations of the exerciseThe exercise was conducted between the 21st of May and the 21st of Juneandfocused on stressing the domestic private credit portfolio, applying bank-levelinformation provided by the BdE within that period.

The scope of the work was as follows: Risk coverage the exercise evaluates credit risk in the performing, nonperforming and foreclosed assets, but excludes any other specific risks such asliquidity risk, ALM, market and counterparty credit risk, etc.

Portfolio coverage The portfolios analysed comprise credits to the domesticprivate sector e. Bank of Spain stress testing exerciseAs a starting point for the analysis, we applied earnings and balance sheetinformation provided by the BdE, as summarised below: In addition to these official statements we have received additional information from BdE thathas been selectively used and adjusted for market experience i.

Banesto Given the absence of reliable loan-level information, we applied the followingmethodology strategy to undertake the exercise: