2) In recent months, as a prior step to the SSM taking over supervisory competences, an assessment has been made of significant institutions, the aim of which is to enhance transparency in respect of their position and to reinforce their solvency. The outcome of this exercise will help the SSM to assume its functions with accurate knowledge of the actual situation of the banks it will directly supervise. The exercise is now close to completion and its results will be made known before the end of this month. It comprises two phases: an asset quality review and a stress test, on which the Banco de España has been working intensely for several months in cooperation with the ECB. The first phase, namely the assessment of the quality of the assets associated with credit and market risk, consisted of verifying the accuracy of the figures and of reviewing asset and collateral values, along with the related provisions (with the collaboration of audit firms). On the basis of the results obtained, exposures have been classified as standard or nonperforming, based on the level of risk, with the ECB imposing painstaking quality control of the results of the review. A stress test is an analysis of credit institutions‘ capacity to absorb losses, evaluating their resilience in different scenarios. The exercise indicates how much capital might be needed were risks to materialise, and it helps highlight areas where supervisory action might be necessary.
The slower catching up of the region is not a new phenomenon as it came on the surface right after the global financial crisis. Most of the post transition real convergence (around 60%) occurred in the 5-year period preceding the GFC, against the backdrop of the remarkably growth-conducive global context, rising globalisation and trade integration, as well as favourable terms of financing. Afterwards the convergence slowed down, and it took twelve years since 2008 up to the pandemic to achieve the pace pertinent for the five years pre GFC period. Now, with the global environment becoming highly uncertain, risk of deglobalisation and supply chains defragmentation becoming more certain, and tightening of the global financial conditions already in place, faster real convergence seems even more complex issue. In this vein, there are estimates that crisis has adversely affected growth potential of the CESEE region with average decline of 0.7 pp in 2020. 3/4  BIS - Central bankers' speeches  What are the main structural hurdles that prevent lifting of the growth potential and resilience? Growth accounting framework reveals that in the last decade the slowdown was mostly through the total factor productivity, while the growth in the region became more reliant on capital accumulation. Given the wide capital stock gaps compared to the more advanced countries, the accumulation of capital is warranted, and preferable way to grow. Yet, the fact that the other sources of growth seem to be muted, gives ground for concerns.