The interest rate risk is well managed in most European banks, the European Central Bank (ECB) reports in a press release dated Monday 9 October, following the publication of the results of its bank surveillance exercise ('stress test') for 2017.
Based on the model of the scenarios set out by the Basel Committee on banking control and in line with the figures available at the end of 2016, the exercise subjected European banks under the direct supervision of the ECB to six scenarios involving interest-rate changes, to determine how the projected economic values of equity and net interest revenue would fluctuate in a changing environment. It also aims to look at how the supervised entities manage these risks.
According to the results, higher interest rates would lead to an increase in net interest income over the next three years for most banks, but a lower economic value of equity. The hypothetical increase in interest rates by 200 points would thus lead to an increase in net interest income of 4.1% in 2017 and 10.5% up to 2019, whilst the economic value of equity would fall by 2.7%, according to the ECB. It is worth noting that these projections are strongly influenced by banks' predictions of their clients' behaviour.
The results of this stress test will now be the subject of individual dialogue with the banks. (Original version in French by Marion Fontana)