FRANKFURT (MNI) – Austrian banks would have an 8.7% tier 1 capital
ratio in the event of a severe stress scenario, the country’s national
bank reported Friday in its Financial Stability Report.

The scenario tested for would include a double-dip recession and an
increase in non-performing loans from both the domestic market and
eastern Europe over a two-year horizon, the central bank said.

The tier 1 capital ratio of the country’s big six banks would be
8.0% in such a scenario, the bank added.

“Even in a severe stress scenario, which is not to be expected in
this form, the banking system would survive, because a large part of
additional risk costs could be covered by operating income,” the bank

“The most recent stress tests the OeNB conducted in spring 2010
show an improvement from the fall 2009 results,” the bank wrote in a
press release.

“But Austrian banks’ capitalization has remained comparatively
low,” it cautioned. “In addition, the ongoing structural adjustment
measures in the Austrian banking sector must be continued.”

–Frankfurt bureau; +49-69-720142;

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