Dear colleagues and friends,
The European Banking Authority (EBA) has published the draft methodological note, templates and template guidance for the 2020 EU-wide stress test on 25 June 2019. The EBA intends to publish the final methodology at the end of the year and to launch the stress test in January 2020, with results to follow by the end of July 2020.
In its Special report 10/2019, the European Court of Auditors just concluded that the latest EBA bank stress test should have been more demanding in testing banks’ resilience to systemic risks across the EU. The simulated shocks were actually milder than those experienced during the 2008 financial crisis and the adverse scenario used did not appropriately reflect all relevant systemic risks to the EU financial system, say the auditors.
Against this backdrop, we would like to know where you see a need for changes and additions. Therefore, we invite you to send us suggestions for specific comments by Friday, 23 August 2019 to sven.giegold@ep.europa.eu
Thank you very much and kind regards,
Sven Giegold
Background
The objective of the EU-wide stress test is to provide supervisors, banks and other market participants with a common analytical framework to consistently compare and assess the resilience of EU banks and the EU banking system to shocks, and to challenge the capital position of EU banks. The exercise is based on a common methodology and a set of templates that capture starting point data and stress test results.
The 2020 EU-wide stress test is initiated and coordinated by the EBA in close cooperation with the European Systemic Board (ESRB), Competent Authorities (including the Single Supervisory Mechanism – SSM) and the European Central Bank (ECB). Scenarios, methodology, minimum quality assurance guidance, templates and template guidance will be agreed by the EBA’s Board of Supervisors. The macroeconomic adverse scenario and any risk type specific shocks linked to the scenario will be developed by the ESRB and the ECB in close cooperation with Competent Authorities and the EBA.
The draft methodology is the starting point for an informal discussion with banks so as to receive their input, which will be taken into account when finalising both documents. For this purpose, explicit questions for banks have been included in the draft methodological note for some topics.