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Investbank successfully passed the Asset quality review under the ECB’s methodology

July 26, 2019

The European Central Bank (ECB) has selected six Bulgarian banks, Investbank JSC amongst them, for Comprehensive Assessment, consisting Asset Quality Review (AQR) and Stress test of the Banks’ capital position under baseline and adverse case scenario. The aim was to develop an analytical framework for the sustainability of the Bulgarian banking system as a part of the process of establishing close cooperation between the ECB and the National competent authority in regard to ERM II (Exchange Rate Mechanism) participation.

The Comprehensive Assessment was conducted from January 2019 till July 2019, following the revised methodology in accordance to IFRS 9. The principle of equal treatment in the Eurozone has been respected as the participating Bulgarian banks have been reviewed under the same rules, as all the Banks directly supervised by ECB.

Investbank JSC has been consulted and methodologically assisted by leading international audit companies throughout the Comprehensive assessment.

The results of the overall review conducted in 2019 show that the Bank is significantly more resilient to adverse market conditions and financial shocks compared to the Asset Quality Review held in 2016.

The adjusted Common Equity Tier I Capital (CET1) ratio after the Asset Quality Review (post-AQR) is 10.01%, which is all above the applicable requirement.

The adjusted CET1 Ratio after the Baseline Scenario, which reflects the closest expectations of macroeconomic developments, is 5.67%.

In the Adverse Scenario, which is hypothetical and highly unlikely due to significant downturns in market prices and macroeconomic indicators for a considerably long period of time, combined with shocks in operating income, the Bank recorded a negative gap in 2021. The capital planning will reflect the need of potential capital support. This scenario is not an economic forecast and should not be considered as indicative of the future financial performance of Banks and the National economy.

For further strengthening of the capital position, Investbank JSC will continue to follow a moderately conservative risk policy by diversifying and restructuring its assets. The financial result will be capitalized and no distribution of dividends to shareholders is foreseen.

As of June 2019, Investbank JSC has already taken specific measures in regard to the individual credit review findings of AQR and has reclassified the problem exposures. RWA are optimized as well.

The management of Investbank JSC would like to express its gratitude to the ECB and to the team of CPMO (Central Project Management Office) for the smooth cooperation, open dialogue and provided additional technical and methodological support in the overall process of the Comprehensive Assessment.

Link to the ECB’s website is available here.