ST_WS_BOSSteam

MINIBANK &
MICROBANK
“ BOSS” T EAM:
I O N J O S A N , N AT I O N A L B A N K O F M O L D O VA
I H O R L U B C H U K , N AT I O N A L B A N K O F U K R A I N E
I E VA M I K A L I U N A I T E , B A N K O F L I T H U A N I A

Description
• MINIBANK & MICROBANK are the two smallest banks in the system in terms of:
‣ own assets,
‣ total risk exposure amount,
‣ issued credit.
Mln.
4 500
4 000
3 500
3 000
2 500
2 000
1 500
1 000
500
-
273 221
Own funds
492 451 422
Mln.
18 000
16 000
14 000
12 000
10 000
8 000
6 000
4 000
2 000
-
Total risk exposure amount
748 591 1 005 1 024
16 000
14 000
12 000
10 000
8 000
6 000
4 000
2 000
-
Credit
746 562 865 879

What their likely activities are based on
the risk classification of their assets?
Considering the criteria of the `supervised` category risk,
and the significant decrease of the real estate prices in
the recent crisis, the big part of the banks’ portfolio is
likely consisted of loans secured by real estate
The banks most probably are focused on corporate
lending, as their small size would not efficiently cover
market net to provide households real estate loans, as
well as reduced `profitability space` to compete with low
rates of the big banks.

Capitalization level
Capital adequacy ratio
60%
50%
40%
30%
20%
10%
0%
49% 48%
41%
37% 36%
32% 31%
26%
23% 21% 19%
• … but above the system
average, looking at Capital
adequacy ratio
CAR
System

CARs under various scenarios
• The stress test results show that both banks are sufficiently
capitalized and remain resilient to potential shocks under all
scenarios analyzed.
• Under the macro-filter scenario, the CAR would decline:
‣ for MINIBANKfrom 36,47% to 18,99%,
‣ for MICROBANKfrom 37,34% to 29,22%.
• The available capital would be sufficient to meet the capital
requirements (min, CCoB, CCyB, SRB).

Whether the banks are above the
minimum solvency requirement?
• Operating with high capital adequacy rates
(36% and 37%) in simulated scenarios, both
banks would meet the minimum level of
capital requirement (8%) while maintaining
sufficient reserves for supervisory
requirements (Pillar II) and capital buffers

Which macroeconomic factor affect the bank the
most?
MINIBANK MICROBANK
Solvency ratio (baseline) 36.47% 37.34%
Solvency ratio (credit) 30.60% 31.35%
Solvency ratio (macro-all) 30.79% 34.71%
• For MINIBANK and MICROBANK the biggest
influence provides combined scenario.
• However, MICROBANK is more stable to
macro-shocks.
Solvency ratio (macro-crisis) 26.21% 32.01%
Solvency ratio (macro-filter) 18.99% 29.22%

Which macroeconomic factor affect the bank the
most?
Macro-all
(Historical)
MINIBANK
Macro-crisis
(Last crisis)
Macro-filter
(Combined)
Macro-all
(Historical)
MICROBANK
Macro-crisis
(Last crisis)
Macro-filter
(Combined)
Provisioning
(before shock) 72 262 778 72 262 778 72 262 778 47 147 030 47 147 030 47 147 030
INDPROD 7 749 212 63 602 921 63 881 514 5 045 432 23 356 861 23 524 560
CPI 9 137 732 13 281 010 22 418 742 3 725 827 5 372 443 9 098 270
EXPORTS 0 0 0 0 0 0
IMPORTS -581 153 12 683 488 12 894 117 1 837 567 8 870 881 8 997 669
FX 44 672 045 -2 002 161 44 974 294 13 117 603 -2 744 972 14 978 351
REALESTP 167 179 16 333 730 17 250 967 -112 669 10 955 657 11 294 486
Other 296 412 92 895 0 263 003 571 894 0
Provisioning (after
macro shock) 133 704 205 176 254 662 233 682 412 71 023 794 93 529 794 115 040 366
• Both banks have the
same “champions”:
FX in historical scenario
INDPROD for last crisis
and combined scenarios
Additional
provisioning 61 441 427 103 991 884 161 419 634 23 876 763 46 382 763 67 893 336

Which bank characteristics influence the stresstest
results in each of the analyzed scenarios?
Credit scenario
Under the credit scenario, banks with lending as
their core business are the most affected.
Banks
Credit to total exposure
amount ratio
Decline in CAR
RURALBANK 99.9 7.0
MINIBANK 99.7 5.9
SECONDBANK 97.0 6.4
FOREIGNBANK 96.0 6.6
MICROBANK 95.0 6.0
INVESTBANK 91.8 4.6
PEOPLESBANK 91.1 5.5
BIGBANK 90.0 6.2
MARKETBANK 86.0 3.7
ELITEBANK 85.8 4.3
SAFEBANK 73.6 3.1
Macro-crisis scenario
Under the macro-crisis scenario, banks with a
larger share of NPLs are the most affected.
Banks NPL to credit ratio Decline in CAR
INVESTBANK 19.3 25.2
MARKETBANK 15.6 15.1
FOREIGNBANK 12.2 9.6
MINIBANK 10.7 10.3
SECONDBANK 9.4 5.9
MICROBANK 8.6 5.3
PEOPLESBANK 6.6 6.8
SAFEBANK 5.2 2.2
BIGBANK 5.0 6.0
ELITEBANK 3.7 3.6
RURALBANK 3.3 3.0

What the bank can do to remediate eventual
non-conformity with solvency requirements?
‣ After the simulated shocks, MINIBANK and MICROBANK are well higher
the minimum capital requirement and the buffers requirements
However
‣ considering their (potential) high portfolio concentration,
‣… the supervisory buffers should cover their specific risks and cover
potential losses.

What other stress testing exercises and/or
macroeconomic factors should be considered?
Other stress testing exercises:
• Market risks
• Operational risks
• Climate risks
Other macro factors to consider:
• Agricultural production
• PPI
• Debt ratios
• Unemployment
• Disposable incomes
• Consumption

Specific questions:
Both banks have roughly the same CAR, however, the ST scenarios produce very different
effects on them. Why??
Macro-ALL
• MINIBANK's portfolio has a higher proportion of non-performing
loans. It is therefore more vulnerable than MACROBANK in the
event of an adverse macroeconomic scenario.
Macro-Crisis
• These results are explained by the different structure of the credit
portfolio. MINIBANK is more significantly affected due to the higher
shares of the „Substandard” and „Compromised” risk category,
which are the most impacted in all 3 scenarios in terms increase in
provisions
Macro-Filter

To sum up
• Both banks are well capitalized: MINIBANK has a capital ratio of 36.47% and MICROBANK a
capital ratio of 37.34%
• The stress test results show that both banks remain resilient to potential shocks and meet
the capital requirements under all scenarios analyzed.