The Mediobanca Group has demonstrated the solidity of its capital indicators over time, despite operating in an increasing strict regulatory framework, and without the need for any capital increases. We monitor our capital adequacy scrupulously to ensure that our equity is consistent at all times with our risk propensity and the regulatory requirements.
We have managed to maintain strong capital ratios without having to implement rights issues like the majority of other Italian banks (our last was in 1998).
Mediobanca’s solid capital ratios
The European regulations on banking supervision have been strengthened in recent years with the Capital Requirements Directive IV and Capital Requirements Regulation (CRD IV/CRR, otherwise known as Basel III). The new regulations set stricter capital requirements for banking activity in terms of the type and amount of the risks faced.
In 2014 the Capital Requirements Directive IV and Capital Requirements Regulation came into force. CRD IV/CRR, otherwise known as Basel III, was transposed into Italian law under Bank of Italy circular no. 285 released in December 2013.
The new regulations are intended to:
- Improve the banking sector’s capability to absorb the shocks deriving from economic and financial tensions
- Improve risk management and governance
- Strengthen banks’ transparency and reporting.
Basel III consists of three pillars:
- Pillar I: minimum capital requirements, risk coverage, leverage ratio. Entails stricter capital requirements in order to meet the risks typically faced in banking activity
- Pillar II: risk management and supervision
- Pillar III: market regulations and new public disclosure requirements.
Capital ratios at 30 June 2017:
- Common equity ratio (CET1 phase-in): 13.3%, higher than at 30 June 2016 (12.1%), despite absorbing the effects of having deducted a share of the Assicurazioni Generali investment from equity
- Total capital ratio (TC phase-in): 16.8%, higher than the 15.3% reported on 30 June 2016
The Group’s objective, as approved in the 2016-19 plan, is to maintain a core tier 1 ratio (Basel III) above 12% for the three years.
RESULTS OF THE STRESS TESTING CARRIED OUT BY THE EUROPEAN CENTRAL
Simulations and sensitivity analyses are used to “stress” the Bank’s equity under difficult operating conditions and to assess how it would change in particularly adverse economic scenarios. The Mediobanca group delivered impressive results in the stress test exercise performed by the European Central Bank, the results of which were published at end-July 2016.
In the adverse scenario to 2018, Mediobanca recorded an impact on the CET1 ratio of just 94 basis points: the CET1 phase-in ratio would decline from 12.40% (31/12/15) to 11.46% (31/12/18), comfortably above the minimum requisite of 8.75%.