Again no surprises in OP-Pohjola Group's stress test results: Group's financial standing very strong

The EU-wide forward-looking stress test, now carried out for the second time, causes no concern to OP-Pohjola Group's capital adequacy, which would remain extremely solid even in the event that economic development turned out to be weaker than forecast. This was the second time running that OP-Pohjola Group received a clean bill of health from the European banking authorities.

Just like last year, OP-Pohjola Group's capital adequacy clearly exceeded the stress test's threshold level.  In the adverse scenario, the Group's capital adequacy remained on a solid basis and clearly above the test's minimum requirement. The Group's Core Tier 1 capital ratio would fall no lower than 11.5%, while the minimum level in the test is 5%.

"The stress test result proves again our solid financial standing and thereby our ability to withstand unexpectedly poor economic developments or negative surprises. I believe that we will rank among the top European banks as we did last year," says Reijo Karhinen, OP-Pohjola Group's Executive Chairman.

The stress test is based on a low-probability adverse scenario.

"The practical connection of the stress test to macroeconomic forecasts was, however, considerably weakened by the EBA's decision taken in the final stages of the exercise for the sake of uniformity, effectively preventing the natural growth of net interest income as the interest rates were rising in general. The assessment of credit losses was similarly simplistic in relation to normal banking practices. If it had not been for these - from the viewpoint of a Finnish retail bank, illogicalities - our results would have been even better than they were.

"On the whole, though, the test was better than last year. Despite its shortcomings, the test and its appendices provide additional information about banks' financial standing and make it possible to compare banks. Stress tests do not prevent crises from happening, but they do play a major role in increasing transparency.

"The challenges facing us in the coming months do not concern the financial standing of banks, rather the rebuilding of trust in Europe. We should now jointly focus on making the big picture clearer, and especially on securing the future of the euro system," emphasises Mr Karhinen.

The European Banking Authority (EBA) carried out in spring 2011 an EU-wide forward-looking stress test in cooperation with national regulators and published results for a total of 90 banks. The test covers some 65% of EU's banking sector in terms of the balance sheet total and at least 50% of each EU country's banking sector. Of the Finnish banks, OP-Pohjola Group was included in the stress test exercise, covering its banking operations, including Pohjola Bank plc and Group member cooperative banks.

The test based on international guidelines covers only banking risks, not risks associated with insurance business. Nevertheless, OP-Pohjola Group also estimates that the financial conglomerate will get high marks in the test for capital adequacy in all scenarios, under the Act on the Supervision of Financial and Insurance Conglomerates.

The Financial Supervisory Authority has approved and verified OP-Pohjola Group's stress tests, and the tests have also been subjected to a comprehensive and thorough peer-group analysis by the EBA.

The stress test is designed to assess a bank's financial strength to withstand economic or financial shocks using the test scenarios for 2011 and 2012. The scenarios and detailed results can be found in the appended analysis report by the Financial Supervisory Authority.

For more information and any requests for interviews, please contact: Carina Geber-Teir, Chief Communications Officer, tel. (040) 502 4697.

Appendix: Report by the Financial Supervisory Authority: "OP-Pohjola group's capital adequacy remains good in European stress testing"

More information is also available on the Financial Supervisory Authority's website at www.finanssivalvonta.fi.