Featured Product

    EBA Publishes Methodology and Draft Templates for Stress Tests in 2020

    November 07, 2019

    EBA published a package for the 2020 EU-wide stress test exercise for banks. The package includes the final methodology, draft templates, and template guidance, along with the key milestones of the exercise. The methodology and templates cover all relevant risk areas and incorporate the feedback received during the discussion with the industry in the Summer of 2019. The stress test exercise will be formally launched in January 2020 and the results will be published by July 31, 2020.

    Similar to the 2018 exercise, the 2020 EU-wide stress test is a bottom-up exercise with constraints, including a static balance sheet assumption. The exercise is primarily focused on the assessment of the impact of risk drivers on the solvency of banks. Banks are required to stress a common set of risks: credit risk, including securitizations; market risk and counterparty credit risk; and operational risk, including conduct risk. Banks are requested to project the impact of the scenarios on net interest income and to stress profit and loss (P&L) and capital items not covered by other risk types. A draft version of the stress test templates has been published along with a template guidance that contains instructions on how to populate them. The draft version of the templates can still be subject to minor technical adjustments before their final publication. 

    The accompanying guidance describes the common methodology that defines how banks should calculate the stress impact of the common scenarios and sets constraints for their bottom-up calculations. In addition to setting these requirements, it aims to provide banks with adequate guidance and support for performing the stress test. The following are the key milestone dates of the stress test exercise:

    • Launch of the exercise at the end of January 2020
    • First submission of results to EBA at the beginning of April 2020
    • Second submission to EBA in mid-May 2020
    • Final submission to EBA in mid-July 2020
    • Publication of results by the end of July 2020

    The aim of the EU-wide stress test is to assess the resilience of EU banks to a common set of adverse economic developments to identify potential risks, inform supervisory decisions, and increase market discipline. The EU-wide stress tests of EBA are conducted using consistent methodologies, scenarios, and key assumptions that have been developed jointly with other authorities. The exercise is coordinated by EBA and conducted in cooperation with ECB, ESRB, EC, and the competent authorities from all relevant national jurisdictions.

     

    Related Links

    Keywords: Europe, EU, Banking, Stress Testing, Methodology, Templates, EU-wide Stress Test, Stress Test 2020, EBA

    Featured Experts
    Related Articles
    News

    EBA Updates List of Validation Rules for Reporting by Banks

    EBA issued a revised list of validation rules with respect to the implementing technical standards on supervisory reporting.

    September 10, 2020 WebPage Regulatory News
    News

    EBA Responds to EC Call for Advice to Strengthen AML/CFT Framework

    EBA published its response to the call for advice of EC on ways to strengthen the EU legal framework on anti-money laundering and countering the financing of terrorism (AML/CFT).

    September 10, 2020 WebPage Regulatory News
    News

    NGFS Advocates Environmental Risk Analysis for Financial Sector

    NGFS published a paper on the overview of environmental risk analysis by financial institutions and an occasional paper on the case studies on environmental risk analysis methodologies.

    September 10, 2020 WebPage Regulatory News
    News

    MAS Issues Guidelines to Promote Senior Management Accountability

    MAS published the guidelines on individual accountability and conduct at financial institutions.

    September 10, 2020 WebPage Regulatory News
    News

    APRA Formalizes Capital Treatment and Reporting of COVID-19 Loans

    APRA published final versions of the prudential standard APS 220 on credit quality and the reporting standard ARS 923.2 on repayment deferrals.

    September 09, 2020 WebPage Regulatory News
    News

    SRB Chair Discusses Path to Harmonized Liquidation Regime for Banks

    SRB published two articles, with one article discussing the framework in place to safeguard financial stability amid crisis and the other article outlining the path to a harmonized and predictable liquidation regime.

    September 09, 2020 WebPage Regulatory News
    News

    FSB Workshop Discusses Preliminary Findings of Too-Big-To-Fail Reforms

    FSB hosted a virtual workshop as part of the consultation process for its evaluation of the too-big-to-fail reforms.

    September 09, 2020 WebPage Regulatory News
    News

    ECB Updates List of Supervised Entities in EU in September 2020

    ECB updated the list of supervised entities in EU, with the number of significant supervised entities being 115.

    September 08, 2020 WebPage Regulatory News
    News

    OSFI Identifies Focus Areas to Strengthen Third-Party Risk Management

    OSFI published the key findings of a study on third-party risk management.

    September 08, 2020 WebPage Regulatory News
    News

    FSB Extends Implementation Timeline for Framework on SFTs

    FSB is extending the implementation timeline, by one year, for the minimum haircut standards for non-centrally cleared securities financing transactions or SFTs.

    September 07, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5796