Abstract
The European banking system has been under considerable pressure since the beginning of the financial crisis in 2007–2008. Except for the global credit crunch, the European sovereign debt crisis has created additional difficulties. In response to the need for increasing the transparency and stability in the European financial/banking system and identifying weaknesses in banks’ capital structures, EU-wide stress tests have been performed by the European Banking Authority (EBA) on a regular basis since 2010. In this context, the aim of this study is to examine the financial performance of the European banks that have participated in the stress tests of EBA. The analysis takes into account the actual financial data of the banks, on the basis of the Capital, Assets, Management, Earnings, Liquidity framework, as well the results of the stress tests. The evaluation of the banks’ financial strength is performed through a robust multicriteria decision aid classification methodology. The latter is used to distinguish between the banks, which failed to meet the minimum capital requirement conditions imposed by EBA, and the well-capitalized ones.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Dias L, Mousseau V, Figueira F, Clímaco J (2002) An aggregation/disaggregation approach to obtain robust conclusions with ELECTRE TRI. Eur J Oper Res 138(2):332–348
Doumpos M, Zopounidis C (2002) Multicriteria decision aid classification methods. Springer, New York
Doumpos M, Zopounidis C (2004) Developing sorting models using preference disaggregation analysis: an experimental investigation. Eur J Oper Res 154:585–598
Doumpos M, Zopounidis C (2007) Regularized estimation for preference disaggregation in multiple criteria decision making. Comput Optim Appl 38(1):61–80
Doumpos M, Zopounidis C, Golfinopoulou V (2007) Additive support vector machines for pattern classification. IEEE Trans Syst Man Cybern Part B 37(3):540–550
Greco S, Matarazzo B, Słowiński R (2001) Rough sets theory for multicriteria decision analysis. Eur J Oper Res 129(1):1–47
Greco S, Mousseau V, Słowiński R (2010) Multiple criteria sorting with a set of additive value functions. Eur J Oper Res 207(3):1455–1470
Hand DJ, Till RJ (2001) A simple generalisation of the area under the ROC curve for multiple class classification problems. Mach Learn 45:171–186
Jacquet-Lagrèze E, Siskos Y (2001) Preference disaggregation: twenty years of MCDA experience. Eur J Oper Res 130(2):233–245
Moody’s (2007) Bank financial strength ratings: global methodology. Moody's Investor Service, New York
Morgan DP, Peristiani S, Savino V (2014) The information value of the stress test. J Money Credit Bank 46(7):1479–1500
Petrella G, Resti A (2013) Supervisors as information producers: do stress tests reduce bank opaqueness? J Bank Financ 37(12):5406–5420
Tikhonov A, Goncharsky A, Stepanov V, Yagola AG (1995) Numerical methods for the solution of ill-posed problems. Springer, Dordrecht
Acknowledgments
This research has been co‐financed by the European Union (European Social Fund—ESF) and Greek national funds through the Operational Program “Education and Lifelong Learning” of the National Strategic Reference Framework (NSRF)—Research Funding Program: THALES. Investing in knowledge society through the European Social Fund.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Doumpos, M., Zopounidis, C. & Fragiadakis, P. Assessing the financial performance of European banks under stress testing scenarios: a multicriteria approach. Oper Res Int J 16, 197–209 (2016). https://doi.org/10.1007/s12351-015-0192-y
Received:
Revised:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s12351-015-0192-y