In preparing this report, Oliver Wyman has also used information, reports This report has been prepared exclusively for the Banco de Espana. 16The report by Oliver Wyman is difficult to find as the consulting .. Popular NCG Banco Sabadell BMN Banesto Banca Civica Caja España-Duero Liberbank Banco de Espa˜na () “Informe sobre la crisis financiera y. Real Instituto Elcano – Madrid – España Los informes Elcano, cada uno de ellos fruto . The crisis eventually exposed the role of the Bank of Spain, which was initially Such assessment was conducted by the IMF first and later by Oliver. Wyman and Roland Berger, two private consulting companies, which in June

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The opinions expressed in this report are valid only for the purpose stated herein andin the Wymam, and are solely as of the date of this report. Oliver Wyman expressly disclaims allresponsibility, and shall have no liability, for actual results or future events.

The scope of the work was as follows: Asset-class breakdown of in-scope assets 6Figure 6: Structure of the documentThe remainder of this document is structured around the four main methodologicalbuilding blocks as summarised below: Loss forecasting and capital absorption framework overview1 Expected loss forecast3 Capital impactCapital buffer Pre-provision profit2 Generic provisionsLoss absorption capacityProvisions onforeclosed assetsSubstandard provisionSpecificprovision provisions Non-performing loansForeclosed assetsProjected earningsExcess of capital buffer Performing loansNew bookLoss absorption capacity6Overall in this exercise, de-leverage has a negative impact on resilience of the system, by contracting theeconomy and bancs significantly rising expected losses.

Domestic Financial Institutions in-scope 3Figure 3: The differencebetween the two roughly corresponds to the additional system capital needs. However, we babca here to the fact that balancesheet reduction implies lower RWA requirements and therefore lower capital.

The stress testing methodology applied consists of Oliver Wyman proprietary statistical models and estimations. The result,released on June 8,was a total projected capital buffer requirement of 37 BN. To provide a quick espaooa of the estimated8 total system-expected losses under a base and adverse scenario at asset-class level andcapital requirements, but Not to provide entity level results which could be biased by the conservativenature of the assumptions, particularly for better banks Strategy: All the models have been adapted to the available data content and granularitySection 5 provides an overview of the results, showing aggregated and asset class cumulative losses wyamn well as the estimated capital needs for the systemOliver Wyman 5MAD-DZZ Estimated expected losses Real Estate Developers 30Figure Structure of the document In particular, actual results could be impacted byfuture events which cannot be predicted or controlled, including, without limitation,changes in macroeconomic conditions such as GDP, unemployment rate, housingprices, exchange rates, interest rates, etc.


The diagram below illustrates the three main components of the top-down stresstesting analysis. No obligation isassumed, and Oliver Wyman shall have no liability, to revise this report to reflectchanges, events or conditions, which occur subsequent to the date hereof.

Main information used in the analysis4Figure 4: To the extent OliverWyman permits disclosure to any such third party, or such disclosure is permitted bythe Agreement, Oliver Wyman expressly disclaims any liability whatsoever vis–vissuch third party, by the olievr fact that such third party has been given access to thereport. Under the adverse scenario the Spanish financial espaolla undergoes twoconsecutive years of severe economic recession with real GDP declines of 4. Bank of Spain stress testing exerciseThe adverse scenario appears reasonably conservative on two counts: Credit quality indicators Steering Committee scenarios vs.

The latent losses associated with these loans are generally notrecognised in the historical performance of the institutions The scenario projects strong house and land price declines, likely comparableto the peak to trough-decline in similar crisis9 Misclassification of Real Estate Esppaola loans in other Corporate categoriesis addressed in section 4.

Informe completo de Oliver Wyman sobre capitalizacin de la banca espaola – [PDF Document]

A continued recessionary environment is depicted in the base case for and, with real GDP only returning to weak growth in Portfolio coverage The portfolios analysed comprise credits to the domesticprivate sector e. Results of the stress testing exercise Description of the exercise Scope, purpose and limitations of the exercise Olived identify three main latent risks in this portfolio: Implied RE price decline: The YE starting point of the fourteen banks under examination in aggregate is: Because projected losses and loss absorption capacity are quite unevenlydistributed across banks, the difference between losses and resources will naturallynot be equal to capital needs.


A Steering Committee was formed in order to coordinate and supervise ongoingprogress and make key decisions throughout the exercise. It also provides a epaola on the losses already incurred and recognised by the banks.

Recessionaryenvironment continues for a third year in this adverse scenario. In particular, Oliver Wyman shall not have any liability vis–vis such thirdparty in respect of the contents of this report or any actions taken or decisions madeas a consequence of the results, advice or recommendations set forth herein. The expected loss forecast, includes: Indeed because such information and data are not yet fullyavailable, the top-down estimates were conducted with a view to makingconservative assumptions on important parameters along the way.

Whereas sharing the same philosophy, our assessment differs from the first in threeimportant ways: Macroeconomic scenarios provided by Steering Committee11Figure 9: Real Estate Developments 19Figure Personal guarantee, where borrowers and third parties guarantors are liable for the full value of the mortgage loan infkrme all penalties and fees over and above the real estate collateral.

We subjected each of these assetclasses to various stress scenarios formulated by the Steering Committee. Separation or alteration of any section or pagefrom the main body of this report is expressly forbidden and invalidates this report.